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Institutional ownership horizon, corporate social responsibility and shareholder value

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  • Erhemjamts, Otgontsetseg
  • Huang, Kershen
Abstract
A widely held view among policymakers, corporate executives and the media is that short-termism among institutional investors is increasingly prevalent. However, some institutional investors are increasingly vocal about taking a long-term approach, and these investors care about environmental, social and governance (ESG) issues. The reality is that investors are a diverse set of stakeholders with various objectives and time horizons. In the academic literature, empirical evidence on the relationship between institutional ownership horizon and corporate social responsibility (CSR) has been mixed. In this paper, we show that institutions with longer (shorter) investment horizons promote (discourage) CSR at the firm level. In addition, the higher the proportion of long-term (short-term) investors, the higher (lower) the effect of CSR on long-term (short-term) buy-and-hold returns. These findings are consistent with the view that short-termism on the part of institutional investors places short-term pressure on companies, and therefore discourages long-term investments that create value.

Suggested Citation

  • Erhemjamts, Otgontsetseg & Huang, Kershen, 2019. "Institutional ownership horizon, corporate social responsibility and shareholder value," Journal of Business Research, Elsevier, vol. 105(C), pages 61-79.
    • Handle: RePEc:eee:jbrese:v:105:y:2019:i:c:p:61-79
    DOI: 10.1016/j.jbusres.2019.05.037
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    More about this item

    Keywords

    Corporate social responsibility; Institutional investors; Investment horizon; Short-termism; Long-term investing;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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