HCBE Faculty Articles


Reexamination of the Relationship between Institutional Ownership Horizon and Corporate Social Responsibility

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SSRN Electronic Journal


Institutional investors are increasingly short-term in their orientation. While the increasing prevalence of short-termism has gained the attention of global forums and policy makers, the case for the long-term investment among institutional investors is far from settled in the academic community. Just like classic agency and stakeholder theories offer opposite views, empirical research on the relationship between institutional ownership and corporate social responsibility (CSR) has produced contradictory results. In this paper, we show that institutions with longer (shorter) investment horizons promote (discourage) CSR at the firm level. In addition, firms with higher proportion of long-term (short-term) investors have higher (lower) buy-and-hold returns in the long-term (short-term). These findings are consistent with the view that short-termism on the part of institutional investors places short-term pressure on companies, and therefore discourages long-term investments that create value.




Unpublished version of journal article.