ABSTRACT
This paper examines the impact of common ownership, where an institutional investor simultaneously blockholds two or more competing firms in the same industry, on portfolio firms’ corporate social responsibility (CSR) performance and its value implications. We propose that common ownership improves CSR performance in portfolio firms. By exploring quasi-natural experiments of corporate environmental and social incidents and financial institution mergers, we use a difference-in-differences (DiD) approach and find strong and robust evidence that supports our prediction. By conducting path analyses using structural equation model (SEM), we further find that CSR driven by common ownership significantly enhances firm value, and such a value-enhancing effect of common ownership-induced CSR is stronger in firms with higher agency problems. Finally, we find that the value-enhancing effect is stronger for CSR that is induced by common owners who are signatories to the United Nations Principles for Responsible Investment (UN PRI). Overall, our results reveal the ‘bright side’ of common ownership.
He, Liyu and Ma, Liangbo, Common Ownership, Corporate Social Responsibility, and Their Value Implications (June 30, 2022).
Leave a Reply