Do Institutional Investors Play a Strategically Ethical Role in the Relation Between Corporate Environmental and Financial Performance?

61 Pages Posted: 2 Mar 2020 Last revised: 20 Jul 2020

See all articles by Steve Miller

Steve Miller

University of South Florida - Muma College of Business

Bin Qiu

Missouri Western State University, Craig School of Business

Bin Wang

Marquette University - College of Business Administration

Tina Yang

University of South Florida - Muma College of Business

Date Written: July 18, 2020

Abstract

Despite the vast literature on why firms should engage in corporate social responsibility (CSR) and an increasing desire expressed by managers to pursue CSR, many managers have yet to integrate CSR principles in their daily practices due to the lack of a clear link between CSR and corporate financial performance (CFP) and the fear that investors will fire managers for poor CFP. We propose a conceptual framework to illustrate that when three conditions hold, institutional investors moderate a positive relation between CFP and corporate environmental performance (CEP). We explore heterogeneities across institution types to demonstrate the importance of each condition. We also theorize and empirically test the channels through which the moderating effect takes place. Our results have important policy and practical implications because institutional investors own over 70% of U.S. firms, and one out of four dollars under professional management was invested in funds with a CSR orientation by the start of 2018.

Keywords: Corporate social responsibility; Environmental, social, and governance; Sustainability; Institutional investors; Shareholder theory; Stakeholder theory; Delegated philanthropy theory

JEL Classification: D22; G34; M14

Suggested Citation

Miller, Steve and Qiu, Bin and Wang, Bin and Yang, Tina, Do Institutional Investors Play a Strategically Ethical Role in the Relation Between Corporate Environmental and Financial Performance? (July 18, 2020). Available at SSRN: https://ssrn.com/abstract=3531077 or http://dx.doi.org/10.2139/ssrn.3531077

Steve Miller

University of South Florida - Muma College of Business ( email )

Sarasota, FL 33620
United States

Bin Qiu

Missouri Western State University, Craig School of Business ( email )

4525 Downs Drive Popplewell Hall
Saint Joseph, MO 64506
United States
8162715954 (Phone)

HOME PAGE: http://www.missouriwestern.edu

Bin Wang

Marquette University - College of Business Administration ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

Tina Yang (Contact Author)

University of South Florida - Muma College of Business ( email )

140 7th Ave S
St. Petersburg, FL 33701
United States
7278734568 (Phone)

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