Saturday, Jan. 7, 2017 1:00 PM – 3:00 PM
- Chair: Harrison Hong, Columbia University
AbstractWe study investments in impact funds, defined as venture or growth equity funds with dual objectives of generating financial returns and positive externalities. Being an impact fund elevates a fund’s marginal investment rate by 14.1% relative to a traditional VC fund, even more for funds focused on environmental, poverty, and minority/women issues. Europeans and UNPRI signatories have sharply higher demand for impact. Three investor attributes – household-backed capital, mission-oriented investors, and investors facing political/regulatory pressure to invest in impact – account for the higher impact demand. In contrast, legal restrictions against impact (e.g., ERISA) hinder 25% of total demand.
Do Institutional Investors Drive Corporate Social Responsibility? International Evidence
AbstractThis paper assesses whether the environmental and social (E&S) performance of firms worldwide is driven by shareholders—an important channel to study because it is their money being spent. Across 41 countries, we find that institutional ownership is positively associated with firm-level E&S performance with multiple tests suggesting this relation is causal. We test whether investors are motivated by their local social norms towards E&S issues. Investors increase firms’ E&S performance when they come from countries where there is a strong community belief in the importance of E&S issues, but not otherwise. Overall, our results indicate that institutional investors drive firms’ E&S performance around the world and transplant their local social norms in that process.
Peer Effects of Corporate Social Responsibility
AbstractWe investigate how firms react to their peers’ commitment to and adoption of corporate social responsibility (CSR), using a regression discontinuity design that relies on the passing or failing of CSR proposals by a small margin of votes during shareholder meetings. We find the marginal passage of a close-call CSR proposal as well as its implementation are followed by the adoption of similar CSR practices by peer firms. Stock returns around the voting dates are lower for peers in a competing relationship if the CSR proposal was passed, but are higher for peers in an alliance partnership. Our evidence suggests that both herding and social utility mechanisms exist in explaining the peer effects of corporate social responsibility.
- G3 - Corporate Finance and Governance