Does Domestic and Foreign Institutional Investment Affect Corporate Social Responsibility? Evidence from Workplace Safety Initiatives

Abstract

We examine whether domestic or foreign institutional investors play a role in CSR engagement reflected in workplace safety. By compiling establishment-level work-related injury data from the Occupational Safety and Health Administration, we document significantly lower injury and illness rates in firms with greater domestic and foreign institutional ownership. However, when firms are geographically proximate to their establishments or have significant union coverage, the institutional monitoring effect is only evident for domestic institutions. Regarding the channel through which institutional investors influence workplace safety, further analysis suggests that firms with higher domestic institutional ownership tend to adopt an employee-friendly corporate culture and invest in organizational capital and workplace safety more than firms with higher foreign institutional ownership. Overall, this study provides novel and robust evidence of the differential monitoring role of domestic and foreign institutional investors in explaining variations in workplace safety outcomes.

Keywords: Workplace safety, total case rate (TCR), injury and illness rate, geographic proximity, social factors