Do institutional investors drive corporate social responsibility? International evidence

This paper assesses whether shareholders drive the environmental and social (E&S) performance of firms worldwide. Across 41 countries, we find that institutional ownership is positively associated with E&S performance with additional tests suggesting this relation is causal. Our evidence shows that institutions are motivated by both financial and social returns. Investors increase firms’ E&S performance following shocks that reveal financial benefits to E&S improvements. In cross-section, 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. These investors, mostly from European countries, transplant their social norms around the world