Institutional blockholders and corporate social responsibility

By analyzing the Korean market characterized by chaebol firms, we provide evidence for the effectiveness of institutional blockholders’ monitoring of firms’ engagement in corporate social responsibility (CSR) activities. Lagged institutional blockholder ownership has a significantly positive effect on an investee firm’s current CSR index, suggesting that institutional blockholders actively engage with firms’ CSR activities to improve these firms’ long-term prosperity and performance, primarily because these blockholders cannot sell their large holdings without eroding the values of their investments. Domestic institutional blockholders have a greater effect on CSR than foreign institutional blockholders have, although the latter blockholders are becoming increasingly influential.