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How Institutional Investors on Boards Impact on Stakeholder Engagement and Corporate Social Responsibility Reporting

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  • Emma García‐Meca
  • María Consuelo Pucheta‐Martínez

Abstract

Institutional investors are relevant dominant owners with a very high representation on the boards of European firms. Despite their prevalence, research on the role of institutional directors and their impact on firm disclosure policy is scarce. We examine the association between institutional directors and corporate social responsibility (CSR) reporting, distinguishing between pressure‐sensitive (e.g. banks) and pressure‐resistant directors (e.g. funds). We find that institutional directors show different incentives and conflicts of interests towards increasing CSR reporting. Specifically, we note that directors representing banks are likely to promote additional information about the firm's environmental and social commitments in order to lower the risk faced by lenders, minimise the probability of default, and maintain their prestige and professional reputation. On the other hand, directors representing fund institutions overweight short‐term earnings potential, which decreases their incentives to improve a firm's CSR reporting. Our findings confirm the importance of institutional investors on CSR reporting policy of firms. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

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  • Emma García‐Meca & María Consuelo Pucheta‐Martínez, 2018. "How Institutional Investors on Boards Impact on Stakeholder Engagement and Corporate Social Responsibility Reporting," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(3), pages 237-249, May.
    • Handle: RePEc:wly:corsem:v:25:y:2018:i:3:p:237-249
    DOI: 10.1002/csr.1451
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    2. Bart Manning & Geert Braam & Daniel Reimsbach, 2019. "Corporate governance and sustainable business conduct—Effects of board monitoring effectiveness and stakeholder engagement on corporate sustainability performance and disclosure choices," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(2), pages 351-366, March.
    3. Davood Andalib Ardakani & Asieh Soltanmohammadi, 2019. "Investigating and analysing the factors affecting the development of sustainable supply chain model in the industrial sectors," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(1), pages 199-212, January.
    4. Aluchna, Maria & Roszkowska-Menkes, Maria & Kamiński, Bogumił & Bosek-Rak, Dominika, 2022. "Do institutional investors encourage firm to social disclosure? The stakeholder salience perspective," Journal of Business Research, Elsevier, vol. 142(C), pages 674-682.
    5. Maximilian Focke, 2022. "Do sustainable institutional investors influence senior executive compensation structures according to their preferences? Empirical evidence from Europe," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1109-1121, September.
    6. Ameen Qasem & Shaker Dahan AL-Duais & Wan Nordin Wan-Hussin & Hasan Mohamad Bamahros & Abdulsalam Alquhaif & Murad Thomran, 2022. "Institutional Ownership Types and ESG Reporting: The Case of Saudi Listed Firms," Sustainability, MDPI, vol. 14(18), pages 1-23, September.
    7. René P. Orij & Saif Rehman & Hashim Khan & Faisal Khan, 2021. "Is CSR the new competitive environment for CEOs? The association between CEO turnover, corporate social responsibility and board gender diversity: Asian evidence," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(2), pages 731-747, March.
    8. Lujun Qi & Lixiang Wang & Wei'an Li, 2020. "Do mutual fund networks affect corporate social responsibility? Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 1040-1050, March.
    9. Meng, Jia & Zhang, ZhongXiang, 2022. "Corporate environmental information disclosure and investor response: Evidence from China's capital market," Energy Economics, Elsevier, vol. 108(C).
    10. Silvia Ruiz & Silvia Romero & Belen Fernandez‐Feijoo, 2021. "Stakeholder engagement is evolving: Do investors play a main role?," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 1105-1120, February.

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