Institutional investors and Corporate Social Responsibility: Evidence from China
Emerging Markets Finance and Trade
25 Pages Posted: 15 Jun 2022
Date Written: June 4, 2022
In this paper, we examine the effect of institutional investors on corporate social responsibility (CSR). We use data on Chinese listed firms from 2010–2018 and find that (1) institutional investors significantly enhance CSR; (2) institutional investors are more inclined to affect CSR engagement through improving firms’ information transparency, internal control, and making more site visits; (3) this positive relationship is more profound for state-owned enterprises, politically connected firms, and firms with low financial constraint; and (4) only long-term institutional investors can drive CSR performance. We use three instrumental variables to address endogenous concerns and the results still hold. Overall, our findings indicate that institutional investors can have a social effect.
Keywords: corporate governance; institutional ownership; corporate social responsibility; China
JEL Classification: G30; M14
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