A Rising Tide Lifts All Boats: The Effects of Common Ownership on Corporate Social Responsibility

• DOI: 10.1287/orsc.2022.1620
• Publication Date: 2022-10-21T13:14:36Z
• Authors: Mark R. DesJardine; Jody Grewal; Kala Viswanathan
• Keywords: Common ownership

Common owners face an incredible investment challenge: managing systematic risk. Because common hold shares in multiple firms across industry, action (or inaction) by one firm that affects industry peers is felt more severely than non-common owners. Research has largely focused on owners’ role orchestrating competitive dynamics among their portfolio firms, with almost no empirical investigation of how manage Drawing research showing firm’s corporate social responsibility (CSR) can produce positive spillovers for peer and its irresponsibility harm peers, we argue increase firms’ CSR to reduce risk multiply returns. Consistent our theory, find ownership positively associated CSR. Unpacking relationship, increases are driven long-term orientations concentrated stakeholder sensitive industries, which most economically impactful. We also focus efforts financially material over immaterial use a natural experiment quasi-exogenous shock rule out alternative explanations. Our study contributes literatures the antecedents outcomes ownership, providing new perspective shape strategic behavior. Supplemental Material: The online appendix available at https://doi.org/10.1287/orsc.2022.1620 .