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Journal of Financial Economics Vol. 135 No. 2 2020

Institutional shareholders and corporate social responsibility

Tao Chen1; Hui Dong2; Chen-Ta Lin3

1 Nanyang Technological University · 2 Shanghai University of Finance and Economics · 3 University of Hong Kong

open access

Abstract

This study uses two distinct quasi-natural experiments to examine the effect of institutional shareholders on corporate social responsibility (CSR). We first find that an exogenous increase in institutional holding caused by Russell Index reconstitutions improves portfolio firms’ CSR performance. We then find that firms have lower CSR ratings when shareholders are distracted due to exogenous shocks. Moreover, the effect of institutional ownership is stronger in CSR categories that are financially material. Furthermore, we show that institutional shareholders influence CSR through CSR-related proposals. Overall, our results suggest that institutional shareholders can generate real social impact.

DOI
10.1016/j.jfineco.2019.06.007
Volume
135
Issue
2
Pages
483-504
Language
en
Sources
crossref bibtex:phds-export.bib openalex

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