Corporate social responsibility and foreign institutional investor heterogeneity

Roy, Partha P. and Rao, Sandeep and Marshall, Andrew P. and Thapa, Chandra (2020) Corporate social responsibility and foreign institutional investor heterogeneity. Preprint / Working Paper. Elsevier, Rochester, NY. (https://doi.org/10.2139/ssrn.3614327)

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Abstract

This paper examines whether the heterogeneity of foreign institutional investors (FIIs) matters when investing in socially responsible investee firms. Exploiting a mandated corporate social responsibility (CSR) regulation in India and using manually collected CSR expenditure data, the results of a quasi-natural experiment confirm that firms that comply with the CSR mandate attract more investments from FIIs. However, the heterogeneity of FIIs plays a significant moderating role, as FIIs from civil law origin countries, and those considered to be independent and long-term investors, invest more in mandated CSR firms. Finally, our empirical evidence also indicates that firms that comply with the CSR mandate experience higher long-term market-based valuations in the post-CSR reform period.

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