{"title":"Do passive investors influence corporate social responsibility? A risk‐management perspective","authors":"Wenxuan Hou, Xiaoyu Zhang","doi":"10.1111/irfi.12466","DOIUrl":null,"url":null,"abstract":"This paper examines the impact of passive investors on Corporate Social Responsibility (CSR) through the lens of a risk‐management view of CSR, which emphasizes its insurance‐like effects in adverse corporate events. Since passive investors have diversified away most idiosyncratic risks, we predict that they demand less CSR as a strategic approach to manage risks. Using the annual Russell 1000/2000 index reconstitution as an instrument for passive investor ownership, we document evidence consistent with our prediction. The negative effect is more pronounced among better‐diversified passive investors and firms that are not in CSR‐sensitive industries. We further show that passive investors hold back CSR activities through the channel of “voice” by reducing the number of socially responsible investment (SRI) proposals.","PeriodicalId":46664,"journal":{"name":"International Review of Finance","volume":null,"pages":null},"PeriodicalIF":1.8000,"publicationDate":"2024-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1111/irfi.12466","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper examines the impact of passive investors on Corporate Social Responsibility (CSR) through the lens of a risk‐management view of CSR, which emphasizes its insurance‐like effects in adverse corporate events. Since passive investors have diversified away most idiosyncratic risks, we predict that they demand less CSR as a strategic approach to manage risks. Using the annual Russell 1000/2000 index reconstitution as an instrument for passive investor ownership, we document evidence consistent with our prediction. The negative effect is more pronounced among better‐diversified passive investors and firms that are not in CSR‐sensitive industries. We further show that passive investors hold back CSR activities through the channel of “voice” by reducing the number of socially responsible investment (SRI) proposals.
期刊介绍：
The International Review of Finance (IRF) publishes high-quality research on all aspects of financial economics, including traditional areas such as asset pricing, corporate finance, market microstructure, financial intermediation and regulation, financial econometrics, financial engineering and risk management, as well as new areas such as markets and institutions of emerging market economies, especially those in the Asia-Pacific region. In addition, the Letters Section in IRF is a premium outlet of letter-length research in all fields of finance. The length of the articles in the Letters Section is limited to a maximum of eight journal pages.
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