Relationship between CSR and institutional investors ownership

What is it about?

This study examines the relation between corporate social responsibility (CSR) and institutional investor ownership, and the impact of this relation on stock return volatility. find that institutional ownership does not strictly increase or decrease in CSR; rather, institutional ownership is a concave function of CSR. This evidence suggests that institutional investors do not see CSR as strictly value-enhancing activities. Institutional investors adjust their percentage of ownership when CSR activities go beyond the perceived optimal level.

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Why is it important?

This study reveals that the motivation of institutional ownership to invest in stocks of CSR firms is unlikely for social values. Consistent with the premise that institutions focus on the valuation effect of CSR activities and the marginal benefit of CSR diminishes as CSR investment increases, we find that institutional ownership is a concave function of CSR. The institutional ownership has an important mediating effect for the relation between CSR and firm risk measured by the stock return volatility.