The color of shareholders' money: Institutional shareholders' political values and corporate environmental disclosure

Incheol Kim, Ji Woo Ryou and Rong Yang

Journal of Corporate Finance, 2020, vol. 64, issue C

Abstract: In this study, we investigate whether and to what extent institutional shareholders' political values influence their investees' environmental disclosure and performance. Using employees' political donation data, we construct institutional investors' political ideology score, which higher (lower) value represents a more Republican- (Democratic)-leaning culture. We find that firms led by institutional shareholders with a more Republican-oriented political ideology are less likely to issue environmental reports. Such a negative effect is more pronounced for firms with institutional shareholders with long-term horizons, with high corporate Republican ideology scores, and without an environmental committee. We further find that institutional shareholders' Republican-oriented political values are negatively associated with their investee firms' environmental performance and green innovations. Overall, our results indicate that institutional shareholders' internal political polarization significantly influences corporate environmental disclosure policies.

Keywords: Institutional shareholders; Political ideology; Environmental disclosure; Environmental committee; Green innovation (search for similar items in EconPapers)
JEL-codes: G23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:64:y:2020:i:c:s0929119920301486

DOI: 10.1016/j.jcorpfin.2020.101704

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