Abstract
We classify institutions into socially responsible institutions (SRI) and non-socially-responsible institutions (NSRI) based on the value weighted Corporate Social Responsibility (CSR) scores of their portfolio holdings. Controlling for CSR scores, stocks that experience an increase in NSRI ownership realize positive excess returns the following quarter. The positive relation between excess returns and NSRI ownership is stronger for stocks with higher CSR scores. We also find that CSR scores tend to increase more for stocks with lower NSRI holdings. These results, which are consistent with the existence of excess CSR expenditures that reduce firm values, suggest that the mix of institutional investors influences CSR choices.
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