Journal of Business Ethics

, Volume 146, Issue 1, pp 77–109 | Cite as

Is Institutional Ownership Related to Corporate Social Responsibility? The Nonlinear Relation and Its Implication for Stock Return Volatility

  • Maretno Harjoto
  • Hoje Jo
  • Yongtae Kim


This study examines the relation between corporate social responsibility (CSR) and institutional investor ownership, and the impact of this relation on stock return volatility. We find that institutional ownership does not strictly increase or decrease in CSR; rather, institutional ownership is a concave function of CSR. This evidence suggests that institutional investors do not see CSR as strictly value-enhancing activities. Institutional investors adjust their percentage of ownership when CSR activities go beyond the perceived optimal level. Employing the path analysis, we also examine the mediating effect of institutional ownership on the relation between CSR and stock return volatility. We find that CSR decreases stock return volatility at a decreasing rate through its effect on institutional ownership. Our results remain robust under several different CSR measures and estimation methods.


Corporate social responsibility Institutional ownership Stock return volatility Socially responsible investing 



Harjoto acknowledges the 2015–2017 Denney Academic Chair from the Denney Endowment, Julian Virtue, Rothschild Endowment, and the Funds for Excellence for financial support and release time for this research project. Parts of this paper were completed while Jo was visiting Korea University and Kim was visiting Hong Kong Polytechnic University.


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Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Pepperdine UniversityMalibuUSA
  2. 2.Santa Clara UniversitySanta ClaraUSA

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