Is Institutional Ownership Related to Corporate Social Responsibility? The Non-Linear Relation and Its Implication for Stock Return Volatility

Download or read book Is Institutional Ownership Related to Corporate Social Responsibility? The Non-Linear Relation and Its Implication for Stock Return Volatility written by Maretno A. Harjoto and published by . This book was released on 2015 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the relation between corporate social responsibility (CSR) and institutional investor ownership, and the impact of this relation on stock return volatility. We find that institutional ownership does not strictly increase or decrease in CSR; rather, institutional ownership is a concave function of CSR. This evidence suggests that institutional investors do not see CSR as strictly value enhancing activities. Institutional investors adjust their percentage of ownership when CSR activities go beyond the perceived optimal level. Employing the path analysis, we also examine the mediating effect of institutional ownership on the relation between CSR and stock return volatility. We find that CSR decreases stock return volatility at a decreasing rate through its effect on institutional ownership. Our results remain robust under several different CSR measures and estimation methods.