Which Corporate Social Deeds Matter? Evidence From the Motivated Institutional Ownership

53 Pages Posted: 29 Oct 2018

See all articles by Jiun-Lin Chen

Jiun-Lin Chen

Valparaiso University

Wenbin Liao

Jiangxi University of Finance and Economics

Ping-Wen Sun

Minjiang University - Newhuadu Business School

Date Written: September 24, 2018

Abstract

Among the 41 items from five corporate social responsibility dimensions: community, diversity, employee relations, environment, and human rights, we examine which corporate social deeds influence institutional investors’ motivated equity ownership most in the U.S. We find that enforcing gay-friendly policies significantly increases the motivated institutional ownership while fairly treating the unionized workforce reduces the motivated institutional ownership after we take the endogeneity issue into consideration. Our further analysis suggests that firms’ innovative activities may contribute to this result. In addition, our finding suggests that independent institutional investors avoid corporate social deeds decreasing a firm’s profitability more than grey institutional investors. Furthermore, we find that failing to protect the environment and having bad relations with indigenous peoples attract more diversified and short-term institutions than dedicated and long-term institutions. Finally, stocks with a higher CSR-determined motivated institutional ownership earn a positive risk-adjusted return of 0.21% per month, suggesting that firms can adjust their corporate social deeds to attract more motivated institutional ownership and increase the demand for their stocks. Collectively, our evidence suggests that economic considerations outweigh social values in driving institutional investors’ preferences for corporate social responsibility activities.

Keywords: Corporate Social Responsibility, Motivated Institutional Ownership, Innovation, U.S.

JEL Classification: A13, G23, M14

Suggested Citation

Chen, Jiun-Lin and Liao, Wenbin and Sun, Ping-Wen, Which Corporate Social Deeds Matter? Evidence From the Motivated Institutional Ownership (September 24, 2018). Available at SSRN: https://ssrn.com/abstract=3261089 or http://dx.doi.org/10.2139/ssrn.3261089

Jiun-Lin Chen

Valparaiso University ( email )

Valparaiso, IN 46383
United States

Wenbin Liao

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Ping-Wen Sun (Contact Author)

Minjiang University - Newhuadu Business School ( email )

Fujian
China

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