Geographic proximity, long-term institutional ownership, and corporate social responsibility

Building on the premises that institutional ownerships vary in their impact on corporate social responsibility (CSR) decisions and that geographic proximity facilitates the valuation of benefits from CSR, we hypothesize that local long-term institutional ownership is a driver for corporate social performance, in particular positive CSR (CSR strengths). Using a panel data of S&P 500 firms over a 15-year window, we show that long-term institutional ownership that varies in geographic proximity to the focal firm does have a heterogeneous impact on CSR. Whereas both local and non-local long-term institutional ownership has a similar negative effect on CSR concerns, only local long-term institutional ownership has a positive effect on CSR strengths. The positive relation between local long-term institutional ownership and CSR is stronger in firms that are more involved in dealing with soft information which is difficult to quantify from a distance, such as those with high levels of research and development and intangible assets.