What type of controlling investors impact on which elements of corporate social responsibility?

Rees, William; Rodionova, Tatiana

doi:10.1080/20430795.2012.738599

Cited by 7 publications

(18 citation statements)

References 58 publications

(18 reference statements)

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“…These large owners bear the cost of investment in ESG projects (Cox et al, ) and have the influence to constrain ESG initiatives. Prior literature offers some, albeit inconclusive, evidence of this negative relationship (Barnea & Rubin, ; Ioannou & Serafeim, ; Rees & Rodionova, ). Our main aim is to isolate the influence of family holdings specifically and compare it to the influence of other closely held equity, but we first revisit the question of the relationship between all closely held stock and corporate ESG levels.…”

Section: Prior Research and Hypothesesmentioning

confidence: 99%

“…Secondly, families may oppose ESG investments as being value destroying (Barnea & Rubin, ; Rees & Rodionova, ). For example, the entrenchment view suggests that activities related to corporate social responsibility may be used by the entrenched management to advance their agenda by appealing to non‐financial stakeholders (Cespa & Cestone, ).…”

Section: Prior Research and Hypothesesmentioning

confidence: 99%

“…However, much of the influence on ESG investment comes from the shareholders of the firm, particularly influential blockholders who monitor management (Barnea & Rubin, ; Shleifer & Vishny, ). While there is some evidence of the negative impact of blockholdings on corporate social responsibility, little attention has been given specifically to the influence of family equity holdings (Barnea & Rubin, ; Mackenzie, Rees, & Rodionova, ; Rees & Rodionova, ). This is potentially important as family owners often retain control of the company management, thereby increasing their influence on decision making (Faccio & Lang, ; La Porta, Lopez‐de‐Silanes, & Shleifer, ; Le Breton‐Miller & Miller, ; Silva & Majluf, ).…”

Section: Introductionmentioning

confidence: 99%

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The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies

Rees¹,

Rodionova²

2014

Corporate Governance

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159

152

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Manuscript Type: EmpiricalResearch Question/Issue: We investigate the impact of family equity holdings on three indicators of corporate social responsibility: environmental, social, and governance (ESG) rankings. We further evaluate how firm governance mediates the effect of family ownership on environmental and social improvements and how national governance systems influence the response of family holdings to ESG. Research Findings/Insights: Based on a sample of 23,902 firm-year observations drawn from 2002 to 2012 covering 46 countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and social rankings, but family ownership retains a significant negative association. These results are strong and consistent across liberal market economies (LME), whereas coordinated market economies (CME) exhibit generally weaker results and considerable diversity. Japan stands out as different from the other countries examined in depth. Theoretical/Academic Implications: Our results are consistent with agency relationships driving decisions concerning ESG commitment in LMEs. They also emphasize the role of institutional differences given the weak and variable association between ownership and ESG in CMEs. We show that families may be able to influence decisions, possibly through participation in management, despite normally effective governance constraints. As the impact of ownership and governance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the context of the economic environment. Practitioner/Policy Implications: Our results offer insights to regulators and policy makers who intend to improve ESG performance. The results suggest that encouraging diversified ownership is particularly important in LMEs, that improvements in governance may benefit social and environmental performance where equity is closely held by institutions, but that governance may be less effective in the presence of family ownership.

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Section: Prior Research and Hypothesesmentioning

confidence: 99%

Section: Prior Research and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies

Rees¹,

Rodionova²

2014

Corporate Governance

Self Cite

159

152

View full text Add to dashboard Cite

show abstract

“…When the financial and social interests of shareholders are aligned, they will actively promote such projects (Sullivan & Mackenzie, 2008). However, Rees and Rodionova (2012) argue that environmental management includes financial CSR, for example for product innovation, and social CSR, for example for emissions reduction. Social CSR implies that expenditures are borne by the owners while the benefits affect the society at large (Rees & Mackenzie, 2011).…”

Section: The Impact Of Incentives and Constraints On Compliancementioning

confidence: 99%

“…There is some evidence from both the US and the UK that engagement by institutional investors can influence management, but this comes from small sample case studies and is not typically focused on corporate social responsibility (CSR) issues (Becht, Franks, Mayer, & Rossi, 2009;Dimson, Karakaş, & Li, 2012;Gifford, 2010). There is also evidence that engagement by shareholders can be driven by considerations of financial or social performance and is conditioned by the institutional setting (Rees & Rodionova, 2012;Sullivan & Mackenzie, 2008;Young & Marais, 2012). Conversely, institutional shareholdings are typically associated with lower performance in the CSR rankings and, whilst this might be most strongly driven by entrenched shareholders, there is no evidence that diversified institutional investors impact beneficially on CSR practices (Rees & Rodionova, 2012;Starks, 2009).…”

Section: Introductionmentioning

confidence: 99%

Do Responsible Investment Indices Improve Corporate Social Responsibility? FTSE4Good's Impact on Environmental Management

Mackenzie¹,

Rees²,

Rodionova³

2013

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This study investigates the impact of a responsible investment index on environmental management practices. Firms that were included in the FTSE4Good index but failed to meet enhanced requirements were subject to both engagement by FTSE and the threat of expulsion from the index. We examine the combined effect of these actions, estimate the contribution of both elements separately, and the influence of concentrated equity ownership, corporate governance, and the institutional environment. We also evaluate whether the effect is persistent or transitory. Research Findings/Insights: For a sample of 1,029 firms from 21 countries, our findings demonstrate that engagement combined with the threat of expulsion from the FTSE4Good index doubles the probability that a firm failing to meet the environmental management criteria in 2002 would comply by 2005. The higher compliance rate for the firms receiving engagement persists until the end of our study in 2010. We also find that compliance is positively associated with low levels of concentrated ownership and with firms based in coordinated rather than liberal market economies. Theoretical/Academic Implications: Our results contribute to the understanding of the complexities of governance, where decision makers are constrained or influenced by equity holders, the firm's governance system, institutional arrangements, and collective engagement by institutional equity holders. Our findings are consistent with both institutional and agency issues impacting on decision making. Practitioner/Policy Implications: Our study suggests that engagement via a responsible investment index reinforced by the threat of public expulsion from the index provides an effective route for large-scale collaborative investor engagement on corporate social responsibility issues targeting large and internationally diverse firms. It also demonstrates why regulators may wish to encourage engagement of this type to achieve social benefits.

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Are institutional investors “in love” with the sustainable development goals? Understanding the idyll in the case of governments and pension funds

García‐Sánchez

Aibar‐Guzmán

Torrado

et al. 2022

Sustainable Development

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Considering the key role that companies must play to achieve the Sustainable Development Goals (SDGs), this paper aims to analyze the effect of the presence of two types of institutional investors (governments and pension funds) in large companies' ownership structure on the alignment of their sustainability strategy towards the 2030 Agenda as well as the moderating effect that firm internationalization and industry's sensitivity to stakeholder pressures have on the influence of these two institutional investors on business commitment to the SDGs. For a sample of 4089 multinational companies from 2015 to 2018, the results show that institutional ownership does matter for business commitment to the SDGs, but in a different way depending on the type of investor. Specifically, ownership by government favors commitment to the SDGs, while ownership by pension funds has a negative impact, which is partially corrected in the case of globalized companies as well as in those firms belonging to industries, which are highly sensitive to stakeholder pressures. These findings seem to suggest that institutional investors' support the implementation of the SDGs by the companies in which they invest is mainly driven by corporate complexity.

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What type of controlling investors impact on which elements of corporate social responsibility?

Cited by 7 publications

References 58 publications

The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies

The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies

Do Responsible Investment Indices Improve Corporate Social Responsibility? FTSE4Good's Impact on Environmental Management

Are institutional investors “in love” with the sustainable development goals? Understanding the idyll in the case of governments and pension funds

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