Abstract
This article examines whether the heterogeneity of foreign institutional investors (FIIs) matters when investing in host firms that are considered to be socially responsible. Exploiting a mandated corporate social responsibility (CSR) regulation and using actual CSR expenditure data, the results of a quasi-natural experiment show that host firms that comply with the CSR mandate attract more FII investment. However, the heterogeneity of FIIs plays a significant role as we find that FIIs from civil law origin countries and, those considered to be independent and long-term investors invest more in mandated CSR firms. Finally, the empirical evidence also indicates that firms that comply with the CSR mandate experience higher long-term market-based valuations in the post-CSR reform period.
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