Corporate Social Responsibility and Reference Shareholders: an Analysis of European Firms
Abstract: We analyze the influence of the ownership structure on the attitude towards corporate social responsibility among European firms. We have measured CSR with two complete and highly reliable sustainability indexes, namely Dow Jones Sustainability STOXX and Ethibel Excellence Index. Using data from 1248 firms form the main five European Union countries (UK, Germany, France, Italy and Spain) for 2000-2004, we find that the power of the largest shareholder is negatively related to CSR actions. Therefore, the higher the fraction of shares owned by the largest shareholder, the less his/her incentives to engage in CSR. Similarly, a higher contest to the power of the main shareholder by other reference shareholders improves the commitment social responsibility of the firms in which they participate. Our results also suggest that family shareholders are more prone to CSR than other kind of investors, whereas the percentage of ownership in the hands of institutional investors has a negative effect on CSR. These results are conditional upon the availability of profitable growth opportunities by firms.
