Does social performance influence breadth of ownership?

Abstract

This study examines the hitherto unexplored question of whether and how a firm's social performance influences the breadth of that firm's share ownership. We predict and find that firms with higher corporate social responsibility (CSR) ratings attract more institutional investors (especially long‐term, low‐stake and green institutional investors) and more individual investors. This finding is consistent with the notion that investors are more interested in firms with higher CSR ratings and thus prefer to hold stocks of such firms. We also find that firms with higher CSR ratings are associated with higher stock liquidity, lower cost of equity capital, more equity and debt issuance, and greater investment, and that sin stocks are associated with a lower investor base, which further corroborates our prediction. Our results are robust to potential endogeneity, the use of alternative model specifications, and an alternative proxy for CSR performance.

Determinants of materiality disclosure quality in integrated reporting: Empirical evidence from an international setting

“…If companies omit certain material issues in their integrated report that are found to be relevant for other companies in the same industry, this can lead to worse sustainability ratings and thus potentially prevent inclusion in the DJSI (Chiu & Wang, ). In addition, we assume that members of the DJSI have a greater number of socially responsible investors (SRI) and other stakeholders, who are concerned about the CSR performance of the firm (Kim, Li, & Liu, ; Serafeim, ). Sustainability‐oriented internal and external stakeholder pressure may lead to greater quality and transparency of (non)financial disclosure (Chiu & Wang, ; Mallin, Michelon, & Raggi, ; Oh, Park, & Ghauri, ).…”

Information‐Processing Costs and Breadth of Ownership

“…Grullon et al (2004) find that firms with more product market advertising expenditures have a larger number of both individual and institutional investors. Kim et al (2016) show that firms 3.…”

The real effects of stock prices: learning, disclosure and corporate social responsibility

“…Our research shows that when a firm has higher social responsibilities, the stock of the firm will lead to higher liquidity, which is supported by Kim et al . (), whose empirical study proves that higher CSR ratings often lead to higher stock liquidity. Another key insight emerging from our analysis is that the information disclosure by the firm with better CSR performance is more precise, which is consistent with the empirical findings of Cheng et al .…”

“…The second stream of literature concerns the relationship between CSR activities and the performance of the firm in the financial market as well as the impact of CSR activities on disclosure policies and real decision‐making. Many empirical analyses focus on the impact of CSR on different aspects of firm performance, such as the cost of capital (Dhaliwal et al ., ), stock liquidity (Kim et al ., ), information asymmetry (Lopatta et al ., ; Benlemlih and Bitar, ) and financial market performance (Gregory et al ., ).…”