Events

Utilizing the revealed preference of institutions, we classify institutions into socially responsible institutions (SRI) and non-socially-responsible institutions (NSRI) by the value weighted Corporate Social Responsibility (CSR) scores of their portfolio holdings. Stocks that experience an increase in SRI ownership (SRIO) tend to increase CSR, especially for those with high current CSR. We also find that increased SRI holdings are associated with negative excess stock returns when the SRI holding information first becomes public, which is consistent with the hypothesis that an anticipated increase in CSR harms shareholders. Our evidence also reveals important differences between hedge funds and other institutional investors. In particular, we find that hedge funds are less likely to be classified as SRI, and that hedge fund holdings tend to be associated with lower CSR growth even when they are classified as SRI.