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This paper examines the role of mutual funds in corporate social responsibility (CSR). Using a fund-level, holdings-based CSR score, we find that CSR-friendly mutual funds improve firms' CSR standings. This effect is more pronounced for firms with higher mutual fund ownership and stronger corporate governance. We further show that while CSR-friendly mutual funds have influence on almost all CSR categories, they focus on increasing CSR strengths rather than reducing CSR concerns. We also discover that CSR-friendly funds are more likely to vote in favor of CSR proposals, and that firms owned by CSR-friendly funds are more likely to link their CEO compensation to CSR outcomes. These results suggest that actively managed mutual funds, which were previously thought to be indifferent (or even detrimental) to social and ethical issues, play a significant role in corporate social outcomes of the firms they invest in. [ABSTRACT FROM AUTHOR]

Using two national culture dimensions, we show that the influence of firms' corporate social performance (CSP) on corporate financial performance (CFP) hinges on culture. Specifically, CFP is higher in those firms where CSR initiatives are congruent with the cultural environment. CSP has a negative impact on CFP for those firms domiciled in countries which are individualistic and favor flexibility. These findings are amplified for those firms with low levels of foreign influence in terms of institutional ownership and sales. Using a dataset covering 5334 firms from 41 different countries, our results indicate that culture and CSR initiatives have a powerful interaction effect in determining CFP, suggesting that CSP's impact is dependent upon the culture of the country where the firm resides. [ABSTRACT FROM AUTHOR]

Based on prior studies which show that firms headquartered in high religiosity counties exhibit high level of business ethics, this study examines whether these firms are associated with low audit risk, and therefore low audit fees. In investigating this relationship, we draw a distinction between intrinsic and extrinsic religiosity of auditees. Using a sample of 25,872 U.S. observations from 2003 to 2012, we find that intrinsic religiosity of the auditees is associated with low audit fees after controlling for auditee extrinsic religiosity, social capital, firm-specific characteristics, and county-specific characteristics. Furthermore, we find that external monitoring (institutional ownership and leverage) weakens the negative relationship between auditee intrinsic religiosity and audit fees. Finally, we conclude that the effect of auditor religiosity on audit fees is a regional effect that may affect the relationship between audit fees and auditee intrinsic religiosity. [ABSTRACT FROM AUTHOR]

The extant literature has examined the effects of ownership structures on corporate social responsibility (CSR), yet it has overlooked the non-linear and interactive effects among major shareholder groups. In this study, we examine the non-linear effects of insider and institutional ownerships on CSR. We also examine whether it is necessary to have both incentive alignment and monitoring mechanisms (complementary view) or it is sufficient to have either mechanism (substitutive view) to promote CSR. Using a sample of the U.S. Fortune 1000 firms, our results suggest that insider and institutional ownerships have non-linear effects on CSR. We also find support for the complementary mechanisms view, in that the highest CSR rating is observed when both ownership levels are high. Therefore, firms need to maintain strong governance structures to realize synergistic effects in promoting CSR. Our findings provide a more in-depth understanding of the relationships between ownership structures and corporate social outcomes. [ABSTRACT FROM AUTHOR]

This study examines the relation between corporate social responsibility (CSR) and institutional investor ownership, and the impact of this relation on stock return volatility. We find that institutional ownership does not strictly increase or decrease in CSR; rather, institutional ownership is a concave function of CSR. This evidence suggests that institutional investors do not see CSR as strictly value-enhancing activities. Institutional investors adjust their percentage of ownership when CSR activities go beyond the perceived optimal level. Employing the path analysis, we also examine the mediating effect of institutional ownership on the relation between CSR and stock return volatility. We find that CSR decreases stock return volatility at a decreasing rate through its effect on institutional ownership. Our results remain robust under several different CSR measures and estimation methods. [ABSTRACT FROM AUTHOR]

We investigate two under-explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud, namely institutional investors and political connections. The role of institutional investors in the effective monitoring of a firm's management is well established in the literature. We further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud. The importance of political connections for enterprises, whether in a developed market such as the United States or an emerging market such as China, has been established by previous studies. However, we find evidence of another positive effect of political connections: they may reduce the incidence of enforcement action against corporate fraud. We also find that political connections play a more significant role in reducing regulatory enforcement incidents against non-state-owned enterprises and firms in weaker legal environments, whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state-owned enterprises. [ABSTRACT FROM AUTHOR]

Although US and European research has documented improvement in earnings quality associated with corporate governance characteristics, the situation in Latin America is questionable, given the business environment in which firms operate, which is characterized by controlling family ownership and weak legal protection. The purpose of this study is to examine the relation between the internal mechanisms of Corporate Governance and Earnings Management measured by discretionary accrual. We use a sample of listed Latin American non-financial companies from the period 2006-2009. Our results show how in the Latin American context the role of external directors is limited and that Boards which meet more frequently take a more active position in the monitoring of insiders, so showing a lower use of manipulative practices. In addition, we find a non-linear relation between insider ownership and discretionary accruals, also pointing to the fact that ownership concentration may be a manipulative practices constrictor mechanism only when the ownership of main shareholders is moderate. The findings have important policy implications since this is, to the best of our knowledge, the first study to analyze the relation between the effectiveness of the government and the earnings management behavior. As policy implications, we document how when a country implements controls aimed at reducing corruption, strengthening the rule of law or improving the effectiveness of government, this leads to a reduction in firm earnings management. [ABSTRACT FROM AUTHOR]

This study investigates the extent to which South African listed corporations voluntarily disclose information on black economic empowerment (BEE) in their annual and sustainability reports using a sample of 75 listed corporations from 2003 to 2009. BEE is a form of socio-economic affirmative action championed by the African National Congress (ANC)-led government to address historical imbalances in business participation and ownership in South Africa. We find that block ownership and institutional ownership are negatively associated with the extent of BEE disclosures, whereas government ownership, board diversity (age, education, ethnicity, nationality and occupation), board size and non-executive directors are positively related to the extent of BEE disclosures. By contrast, dual board leadership structure and gender diversity are not significantly associated with BEE disclosures. Our results are robust when controlling for firm-level characteristics, fixed-effects and alternative disclosure proxies. Our results are largely consistent with the predictions of agency, legitimacy, resource dependence and stakeholder theories. [ABSTRACT FROM AUTHOR]

For a sample comprising 36,105 U.S. firm-year observations from 1985 to 2008, we find that firms located in more religious counties enjoy cheaper equity financing costs. This result is robust to a battery of sensitivity tests, including alternative assumptions and model specifications, additional controls for noise in analyst forecasts, and various approaches to addressing endogeneity. In another set of tests, we find that the equity pricing role that religion plays comes predominantly from Mainline Protestants. We also document that the effect of religiosity on firms' cost of equity capital is larger for firms (periods) lacking alternative monitoring (regulation) mechanisms as measured by lower institutional ownership (the pre-SOX era), implying that religion plays a corporate governance role. Finally, we find that the importance of religion to equity pricing is concentrated in firms that suffer lower visibility, which tend to be more sensitive to local social and economic factors. By examining the links between religiosity and valuation at the firm level, we provide strong, robust evidence supporting the perspective that religion facilitates economic development. [ABSTRACT FROM AUTHOR]

Relatively little research has examined the effects of ownership on the firms' corporate social responsibility (CSR). In addition, most of it has been conducted in the Western context such as the U.S. and Europe. Using a sample of 118 large Korean firms, we hypothesize that different types of shareholders will have distinct motivations toward the firm's CSR engagement. We break down ownership into different groups of shareholders: institutional, managerial, and foreign ownerships. Results indicate a significant, positive relationship between CSR ratings and ownership by institutions and foreign investors. In contrast, shareholding by top managers is negatively associated with firm's CSR rating while outside director ownership is not significant. We conclude that different owners have differential impacts on the firm's CSR engagement. [ABSTRACT FROM AUTHOR]

This study investigates the effects of internal and external corporate governance and monitoring mechanisms on the choice of corporate social responsibility (CSR) engagement and the value of firms engaging in CSR activities. The study finds the CSR choice is positively associated with the internal and external corporate governance and monitoring mechanisms, including board leadership, board independence, institutional ownership, analyst following, and anti- takeover provisions, after controlling for various firm characteristics. After correcting for endogeneity and simultaneity issues, the results show that CSR engagement positively influences firm value measured by industry-adjusted Tobin's q. We find that the impact of analyst following for firms that engage in CSR on firm value is strongly positive, while the board leadership, board independence, blockholders' ownership, and institutional ownership play a relatively weaker role in enhancing firm value. Furthermore, we find that CSR activities that address internal social enhancement within the firm, such as employees diversity, firm relationship with its employees, and product quality, enhance the value of firm more than other CSR subcategories for broader external social enhancement such as community relation and environmental concerns. [ABSTRACT FROM AUTHOR]

In recent years, firms have greatly increased the amount of resources allocated to activities classified as Corporate Social Responsibility (CSR). While an increase in CSR expenditure may be consistent with firm value maximization if it is a response to changes in stakeholders' preferences, we argue that a firm's insiders (managers and large blockholders) may seek to over- invest in CSR for their private benefit to the extent that doing so improves their reputations as good global citizens and has a 'warm-glow' effect. We test this hypothesis by investigating the relation between firms' CSR ratings and their ownership and capital structures. Employing a unique data set that categorizes the largest 3000 U.S. corporations as either socially responsible (SR) or socially irresponsible (SI), we find that on average, insiders' ownership and leverage are negatively related to the firm's social rating, while institutional ownership is uncorrelated with it. Assuming that higher CSR ratings is associated with higher CSR expenditure level, these results support our hypothesis that insiders induce firms to over-invest in CSR when they bear little of the cost of doing so. [ABSTRACT FROM AUTHOR]

The non-financial effects (NFE) anti-takeover amendment addresses the duties of company directors and management when faced with a possible takeover bid. The NFE amendment either permits or requires managers to consider the interests of the company's stakeholders during takeover bids. Other types of anti-takeover devices have been viewed as protecting either stockholder or management interests. The NFE amendment would appear to protect a broad spectrum of interests including those of company employees, creditors, and the community in which the company operates. Positive market returns to the adoption of NFE amendments provide some evidence that investors approve. The percent of both management and institutional ownership are positively related to the market reaction to the NFE amendment adoption. To the extent that institutional ownership proxies for the broad spectrum of stakeholder interest, NFE devices, unlike some other amendments that have been studied, appear to be in the interests of more than a single interest group. [ABSTRACT FROM AUTHOR]

Managers encounter difficulties in developing corporate social responsibility programmes. These difficulties arise from conflicting interests and priorities. Pressures may be both internal and external and corporate social responsibility programmes usually evolve from a combination of proactive and reactive policies. The first experiences of a company are likely to be reactive, in response to requests for equipment, sponsorship or charitable donations but companies soon become aware of the benefits of planned programmes. Planning implies objectives, performance criteria and evaluation, and a rational framework for decision-taking. This paper attempts to highlight problem areas for managers and to develop a pragmatic framework of analysis which will help identify and clarify corporate social responsibilities. The paper, which is written from a UK perspective discusses the contribution of stakeholder models and highlights limitations of this approach. It develops an ethical framework focused on concepts of responsibility. [ABSTRACT FROM AUTHOR]

Collectively, institutions own an increasing proportion of outstanding corporate equities. As an emergent force in shaping corporate America, the linkages between institutional ownership and corporate social performance (CSP) require empirical examination. Not only do corporate policy makers need to know those areas where social performance may lure or inhibit capital infusions, lawmakers also need a better understanding of the social forces guiding corporate policy. As anticipated, this study found a positive relationship between the amount of institutional ownership of corporate stock and a company's social responsiveness as measured by the representation of women on its board of directors; however, no statistically significant relationship with social responsibility as measured by charitable giving was found. The exemplar of social issues management - compliance with the Sullivan principles - showed an unexpected, negative relationship with the level of institutional ownership. [ABSTRACT FROM AUTHOR]

The relationship between corporate social responsiveness and profitability is investigated in a sample of corporate directors. The findings show there is no relationship between the level of director social responsiveness and corporate profitability. The implications of these results are discussed, especially as they relate to concerns about corporate governance. [ABSTRACT FROM AUTHOR]