Document Type
Article
Publication Date
10-2019
Publisher
INFORMS (Institute for Operations Research and Management Sciences)
Source Publication
Management Science
Source ISSN
0025-1909
Original Item ID
10.1287/mnsc.2018.3055
Abstract
This paper studies the role of institutional investors in influencing corporate environmental, social, and governance (ESG) policies by analyzing the relation between institutional ownership and toxic release from facilities to which institutions are geographically proximate. We develop a local preference hypothesis based on the delegated philanthropy and transaction-costs theories. Consistent with the hypothesis, local institutional ownership is negatively related to facility toxic release. The negative relation is stronger for local socially responsible investing (SRI) funds, local public pension funds, and local dedicated institutions. We also find that the relation is more negative in communities that prefer more stringent environmental policies and in communities of greater collective cohesiveness. Local institutional ownership, particularly local ownerships by SRI funds and public pension funds, is positively related to the probability that an ESG proposal is either introduced or withdrawn. The paper sheds light on the drivers behind institutions’ ESG engagement and their effectiveness in influencing ESG.
Recommended Citation
Kim, Incheol; Wan, Hong; Wang, Bin; and Yang, Tina, "Institutional Investors and Corporate Environmental, Social, and Governance Policies: Evidence from Toxics Release Data" (2019). Finance Faculty Research and Publications. 151.
https://epublications.marquette.edu/fin_fac/151
Comments
Accepted version. Management Science, Vol. 65, No. 10 (October 2019): 4451-4949. DOI. © 2019 INFORMS (Institute for Operations Research and Management Sciences). Used with permission.