Does Ownership Type Matter for Corporate Social Responsibility?

Abstract

Manuscript Type: EmpiricalResearch Question/Issue: This study examines how different types of owners relate to corporate social responsibility (CSR). Research Findings/Insights: We use firm-level data for more than 600 European firms from 16 countries and 35 industries for 2005. We find that ownership by employees, individuals, and firms is associated with relatively poor corporate social policies of the firms they invest in. In contrast, the holdings by banks and institutional investors as well as those by the state appear to be neutral in this respect. Theoretical/Academic Implications: This study develops and tests notions as to how particular types of owners could have a specific impact on the firm's CSR. The relative value put upon CSR can differ along different types of owners. This results from their different economic roles in society. The study provides empirical support for the relationship between ownership type and CSR policies in Europe. As such, it provides a new focus on the content of shareholder activism, namely that shareholder background has to be taken into account. Another innovation is that we show it is important to account for the multidimensional nature of CSR as well. Practitioner/Policy Implications: This study offers a new perspective for firms, investors and other stakeholders about portfolio investments and CSR. As we find that it does matter who invests, corporate engagement policies can be directed much more effectively. In particular, the investors who act as intermediaries appear to be the most sensitive ones in this respect. Our study suggests that firms should take the background of their shareholders into account in relation to their CSR strategy. Furthermore, our study helps stakeholders to direct their efforts more effectively. It also provides a perspective for executives and investment managers of multinational firms to consider if and how they can create social value next to shareholder value. We suggest that policy makers promote the transparency of ownership information as well as that of CSR performance.

The role of board gender and foreign ownership in the CSR performance of Chinese listed firms

“…Such results contrast with findings in other emerging markets, where the broader evidence points to foreign owners supporting social-engagement (Oh et al, 2011;and Soliman et al, 2012). Nonetheless, our results reaffirm findings on foreign-investor effects in developed market settings (Barnea and Rubin, 2010;and Dam and Scholtens, 2012). Findings in relation to our cross-listing dummy (Overseas) question whether the purported 'bonding', governance and disclosure (Coffee, 1999;Stulz, 1999;Oxelheim and Randoy, 2005;Karolyi, 2006 andHope et al, 2013) effects of an offshore listing extend to areas like social-engagement.…”

“…Non-linear associations with CSR are also evident in relation to state ownership (Li and Zhang, 2010;and Dam and Scholtens, 2012).…”

“…Dam and Scholtens' (2012) European market analysis also reveals limited association. However, Wang and Chen (2016) find enhanced social performance in Chinese-listed firms accommodating greater institutional investment.…”

Diversification and corporate social performance in manufacturing companies

“…The dependent variable in this study is CSP. CSP is company performance, which reflects company's response to stakeholder demands and social issues (Kang 2013 (Dam and Scholtens 2012;Peng and Yang 2014). Hence, KLD is not widely available in companies from developing country setting.…”

“…Finally, to control other variables which are predicted to have an impact on CSP based on extensive theoretical and empirical literature, this research applies public ownership (percentage of public ownership), Institutional ownership (percentage of institutional ownership), Governance ownership (Dummy governance ownership), board size (number of board of commissioner in Indonesia context), company size (Logarithm of Total Assets), financial leverage (Debt asset ratio; Total debt to total Assets), company profitability (Return on Asset; percentage of earnings before interest and taxes to total assets), Intangible assets (Market to book ratio; Market price to book value) and industry CSP (mean of CSP score by industry in 2 digit of ISIC) (Brammer et al 2006;Dam and Scholtens 2012;Huang and Watson 2015;Kang 2013;Khan et al 2013;Kilic et al 2015;Lahouel et al 2014;Li et al 2015;McGuire et al 2012;Nation 2008;Neubaum and Zahra 2006;Ntim and Soobaroyen 2013;Peng and Yang 2014;Walls et al 2012). Thus, to summarise, Table 1 shows the operation of variables and measurement.…”