Is corporate social responsibility sufficient enough to explain the investment by socially responsible funds?

Onur Kemal Tosun ()
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Onur Kemal Tosun: University of Warwick

Review of Quantitative Finance and Accounting, 2017, vol. 49, issue 3, No 5, 697-726

Abstract: Abstract I propose an explanation for investment decisions by socially responsible investment funds (SRI) on the firms with higher corporate social responsibility (CSR). Different from the previous literature, I use a unique and comprehensive measure that considers both firm CSR ratings and fund CSR perception. I show SRI mutual funds increase their ownership about 15 % for one unit increase in the firm CSR score when those funds are highly sensitive to CSR. This finding is more pronounced for employee relations and society areas of CSR. The results also hold for a broader range of mutual funds. While industry concentration does not have influence on the fund investment, SRI funds particularly choose socially responsible firms operating in construction, transportation, personal services, and financial sector. I show the funds with CSR sensitivity underperform the market in general and fail to improve their portfolio performance after they invest in the firms with high CSR.

Keywords: Socially responsible investment; Corporate social responsibility; Employee relations; Dual measure; Portfolio performance (search for similar items in EconPapers)
JEL-codes: C33 G11 G30 M14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11156-016-0605-x

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