Effects of CSR Performance and Disclosure on Institutional Ownership

Study investigates correlations and lead-lag relationships between Corporate Social Responsibility (CSR) and the institutional ownership base of North American and European utility companies. Authors use two samples of 105 and 87 mid- to large-cap utility companies and a multivariate panel data regression, to examine each of the CSR dimensions (environmental, social and governance) for the period of 2011 to 2015. Additionally, a lead-lag analysis establishes causality between the variables. The study finds that while more socially responsible utility companies exhibit greater long-term institutional ownership (LIO), higher corporate governance disclosure and performance is accompanied by less long-term and greater short-term institutional ownership. On the one hand, lead-lag analysis entirely supports a causal effect of CSR performance on LIO (i.e. the hypothesized causality of this study), indicating that CSR performance indeed has an effect on long-term institutional ownership. On the other hand, the lead-lag analysis shows a causal effect of LIO on CSR disclosure, indicating that it is rather the long-term institutional investor influencing CSR disclosure of sample firms than the other way around. As for the short-term horizon, the lead-lag analysis shows a causal effect of CSR performance and disclosure on the short-term institutional ownership base of sample firms. This study contributes to scientific literature by using a recent and high-quality data set, looking at both the performance and disclosure dimension of CSR. Furthermore, most prior studies have only looked at simple correlations, neglecting the causality issue. This study establishes causality between the variables with a lead-lag analysis.

Author Information
Andreas Gruener, University of St. Gallen, Switzerland
Daniel Fauser, University of St. Gallen, Switzerland

Paper Information
Conference: ECSEE2017
Stream: Economic Sustainability: Sustainable Businesses and CSR

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