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

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  • Onur Kemal Tosun

    (University of Warwick)

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.

Suggested Citation

  • Onur Kemal Tosun, 2017. "Is corporate social responsibility sufficient enough to explain the investment by socially responsible funds?," Review of Quantitative Finance and Accounting, Springer, vol. 49(3), pages 697-726, October.
    • Handle: RePEc:kap:rqfnac:v:49:y:2017:i:3:d:10.1007_s11156-016-0605-x
    DOI: 10.1007/s11156-016-0605-x
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    References listed on IDEAS

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    Cited by:

    1. Dimitrios Koutmos & Bochen Wu & Qi Zhang, 2020. "In search of winning mutual funds in the Chinese stock market," Review of Quantitative Finance and Accounting, Springer, vol. 54(2), pages 589-616, February.
    2. Orlando Gomes, 2020. "Optimal growth under socially responsible investment: a dynamic theoretical model of the trade-off between financial gains and emotional rewards," International Journal of Corporate Social Responsibility, Springer, vol. 5(1), pages 1-17, December.
    3. Kara Nel & Nadia Mans-Kemp & Pierre D. Erasmus, 2023. "Sustainable Thematic Investing: Identifying Opportunities Based on an Analysis of Stewardship Reports," Sustainability, MDPI, vol. 15(10), pages 1-20, May.
    4. Kumari Juddoo & Issam Malki & Sudha Mathew & Sheeja Sivaprasad, 2023. "An impact investment strategy," Review of Quantitative Finance and Accounting, Springer, vol. 61(1), pages 177-211, July.
    5. Das, Nandita & Chatterje, Swarn & Ruf, Bernadette & Sunder, Aman, 2018. "ESG Ratings and the Performance of Socially Responsible Mutual Funds: A Panel Study," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17(1), pages 49-57.

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    More about this item

    Keywords

    Socially responsible investment; Corporate social responsibility; Employee relations; Dual measure; Portfolio performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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