Minority shareholder activism and corporate social responsibility

Abstract

China has many minority shareholders, but it is still unclear whether they actively influence corporate social responsibility (CSR) decisions to protect their own benefits. However, previous research mainly focuses on the effect of institutional investors on CSR. Based on big data from China's influential stock forums, we developed a novel measure of minority shareholder activism (MSA) to capture the time and effort invested by minority shareholders. Using firm-level data from China during 2010–2018 and the novel measure, we find that MSA improves CSR performance. Furthermore, this effect of MSA on CSR weakens in polluting industries after implementing the new environmental protection law, implying that MSA improves CSR through monitoring mechanisms, particularly in an imperfect legal system. Cross-sectionally, this main effect is influenced by sentiment, financial constraints, ownership, analyst coverage, transparency, and public pressure. Our findings suggest that MSA can affect corporate decision-making and generate social benefits. • We use big data to develop a novel measure of minority shareholder activism (MSA). • The effect of MSA on corporate social responsibility (CSR) is examined. • MSA has a positive effect on CSR performance. • Monitoring channels explain the positive effect. • Sentiment, financial constraints, ownership, and public pressure are moderators.