The effect of institutional dual holdings on CSR performance

Kerstin Lopatta, Alexander Bassen, Thomas Kaspereit, Sebastian A. Tideman and Daniel Buchholz

Journal of Sustainable Finance & Investment, 2022, vol. 12, issue 2, 431-450

Abstract: This study sheds light on agency conflicts between creditors and shareholders and their effect on a firm's corporate social responsibility (CSR) performance. We find that the presence of institutional investors which simultaneously hold debt and equity claims in the same firm, so-called dual holders, leads to an increase in CSR performance by the firm that is dual-held (the dual holding firm). Using institutional mergers between separate lenders and equity holders as a natural experiment involving the shareholder-creditor conflict, we find that firms which exhibit dual ownership for the first time increase their CSR activities to a greater extent than a matched control group. In line with the previous literature, we interpret our findings as evidence that dual holders internalise agency conflicts. Thus, we find that a reduction in agency conflicts between creditors and shareholders, partly achieved by dual holders, positively affects the CSR activities of dual holdings.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jsustf:v:12:y:2022:i:2:p:431-450

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DOI: 10.1080/20430795.2020.1776535

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