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Does social performance influence breadth of ownership?
Author(s) -
Kim JeongBon,
Li Bing,
Liu Zhenbin
Publication year - 2018
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12341
Subject(s) - endogeneity , corporate social responsibility , equity (law) , business , proxy (statistics) , market liquidity , institutional investor , monetary economics , stock (firearms) , debt , accounting , financial economics , economics , finance , corporate governance , econometrics , mechanical engineering , ecology , machine learning , political science , computer science , law , biology , engineering
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.