Thursday, September 16, 2021
We examine relationship between common institutional ownership and corporate social responsibility (CSR). We find that common institutional ownership is negatively associated with the level of CSR, which supports an anti-competitive view. We conduct a propensity score matching (PSM) analysis and a difference-in-differences (DiD) analysis based on a quasi-natural experiment of financial institution mergers. The results alleviate concerns about endogeneity. Using the DiD setting, we find further support for the anti-competitive channel, and can rule out alternative explanations. Additional analyses on investor characteristics show that our results come mainly from common owners with long-term investment horizons or low social inclination. Moreover, we find that the anti-competitive effect is more pronounced for mature firms, and for firms in industries with lower labor intensity and low customer sensitivity.