Corporate Social Responsibility and Foreign Institutional Investor Heterogeneity
70 Pages Posted: 8 Jun 2020 Last revised: 27 Aug 2020
Date Written: May 30, 2020
This article examines whether the heterogeneity of foreign institutional investors (FIIs) matters when investing in host firms that are considered to be socially responsible. Exploiting a mandated corporate social responsibility (CSR) regulation and using actual CSR expenditure data, the results of a quasi-natural experiment show that host firms that comply with the CSR mandate attract more FII investment. However, the heterogeneity of FIIs plays a significant role as we find that FIIs from civil law origin countries and, those considered to be independent and long-term investors invest more in mandated CSR firms. Finally, the empirical evidence also indicates that firms that comply with the CSR mandate experience higher long-term market-based valuations in the post-CSR reform period.
Keywords: CSR expenditure, Foreign institutional investors, Legal origin, Independent and long-term investors, Market valuation
JEL Classification: G23, G38, M14
Suggested Citation: Suggested Citation