The Color of Shareholders’ Money: Institutional Shareholders’ Political Values and Corporate Environmental Disclosure

Posted: 25 Sep 2020

See all articles by Incheol Kim

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship

Ji Woo Ryou

West Virginia University

Rong Yang

Rochester Institute of Technology

Date Written: August 10, 2020

Abstract

In this study, we investigate whether and to what extent institutional shareholders’ political values influence their investees’ environmental disclosure and performance. Using employees’ political donation data, we construct institutional investors’ political ideology score, which higher (lower) value represents a more Republican- (Democratic)-leaning culture. We find that firms led by institutional shareholders with a more Republican-oriented political ideology are less likely to issue environmental reports. Such a negative effect is more pronounced for firms with institutional shareholders with long-term horizons, with high corporate Republican ideology scores, and without an environmental committee. We further find that institutional shareholders’ Republican-oriented political values are negatively associated with their investee firms’ environmental performance and green innovations. Overall, our results indicate that institutional shareholders’ internal political polarization significantly influences corporate environmental disclosure policies.

Keywords: institutional shareholders; political ideology; environmental disclosure; environmental committee; green innovation

JEL Classification: G23

Suggested Citation

Kim, Incheol and Ryou, Ji Woo and Yang, Rong, The Color of Shareholders’ Money: Institutional Shareholders’ Political Values and Corporate Environmental Disclosure (August 10, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3670783

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship ( email )

1201 W University Dr
Edinburg, TX 78539
United States

Ji Woo Ryou

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

Rong Yang (Contact Author)

Rochester Institute of Technology ( email )

Saunders College of Business
Rochester Institute of Technology
Rochester, NY 14623
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
154
PlumX Metrics