Does institutional ownership affect corporate social responsibility? Evidence from China

Abstract

This paper assesses the correlation between institutional ownership and corporate social responsibility (CSR). Our results indicate that institutional ownership is positively associated with firms' CSR scores, which is largely driven by pressure-resistant institutions rather than pressure-sensitive institutions. Moreover, we find that the positive association is stronger for firms with state-owned, poorer initial CSR performance, and located in regions with a higher level of marketization. Further analyses imply that the beneficial effect on CSR scores has a smaller with an increase in institutional ownership concentration, whereas the strength of corporate governance can alleviate the damaging influence of institutional ownership on CSR performance. Finally, we identify two potential mechanisms through which institutional ownership affects CSR projects: Financial constraints and analyst attention.