Preference Of Institutional Investors On Corporate Social Responsibility

Institutional investors have become the main part of China’s capital market. At the same time, corporate social responsibility (CSR) has been paid more attention on. So it is meaningful to research Institutional investors’ preferences on CSR. Because of it, Institutional investors can respond to CSR properly. Additionally, it can encourage corporate to take social responsibility actively and realize sustainable development. Furthermore, it is helpful to complete and stable China’s capital market.First, the theoretical relationship between institutional investor holdings and CSR is introduced. Considering the simultaneous causality between them, a lagged dependent variable is used. On the basis of this, institutional investor preferences for CSR are researched in depth. To study the screening method of institutional investors, two dummy variables are established:BEST means a corporate with good CSR, and WORST means a corporate with bad CSR. Then, three kind of empirical studies is done. First one studies the effect of CSR on long investors and short investors. Second one researches the influence of CSR initiating structures on long investors and short investors. Third one discusses the screening method of institutional investors.As a result, there is a difference between different institutional investor preferences for CSR. As for long investor holdings, there is a positive correlation with CSR, particularly, with the economic development responsibility is stronger than other initiating structures and the positive correlation with the society progress responsibility is stronger than the environmental protection responsibility. As for short investor holdings, there is no significant correlation with CSR, but a negative correlation with the environmental protection responsibility. What’s more, long investors choose negative screening combine with positive screening while short investors just use negative screening.