Do foreign institutional investors drive corporate social responsibility? Evidence from listed firms in China

By Zhe Li, Ping Wang, Tianlong Wu. Journal of Business Finance & Accounting, 2020

144 citations recorded by the source corpus.

This paper investigates the effect of qualified foreign institutional investors (QFIIs) on corporate social responsibility (CSR) within the context of listed firms in China. We find that QFIIs offer an incisive channel for improving socially responsible practices. In addition, we find that firms with QFIIs are more likely to comply with the Global Reporting Initiative (GRI) guidelines, and that their sustainability reports tend to be longer. We also find that this positive effect is more pronounced in firms with low initial CSR scores than those with high CSR scores at the time when QFIIs enter the sample. Our empirical evidence further confirms that this positive impact is driven by QFIIs from countries with high social awareness, or QFIIs from geographically distant countries, consistent with their motives, and is linked to the ownership of QFIIs,especially when theQFIIis among thetoptenofthe largest shareholders. Finally, our extended analysis reveals that the increase in CSR performance associated with the presence of QFIIs results in greater firm performance and easier access to finance. literature on the role of foreign institutional investors. Prior studies exploring the effects of foreign ownership mainly focus on corporate governance (Huang & Zhu, 2015), firm performance al., 2006), accounting quality et al., 2017), and the integration of human and financial resources (Huang & Shiu, 2009). This study enriches the literature on the stakeholder-oriented implications of foreign ownership and highlights the importance of foreign investors in deploying social-engagement activities in the Chinese market.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/350ea18b3999c1597d1f2435160d8834e3902a59