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How Foreign Institutional Shareholders' Religious Beliefs Affect Corporate Social Performance?

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In this paper, we employ the unique qualified foreign institutional investors (QFII) scheme in China to investigate whether and how the different religious beliefs in the areas where foreign institutional shareholders from are associated with the corporate social responsibility (CSR) performance of domestic firms. After controlling for other determinants, we find robust evidence that firms with QFII investors from areas with stronger religious beliefs have better CSR performance than those that do not have these beliefs'. This association is more pronounced when a QFII has a shorter holding period, has a relatively large ownership in the firm, or is a more committed investor in China. The above moderating results show that the stock preference may be a channel through which religious QFIIs affect firms’ CSR performance. Our paper contributes to the growing body of literature on CSR and on the effects of investors’ religious beliefs. It also offers useful guidance to listed companies, institutional investors, regulators, and other stakeholders.

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  1. The QFII scheme was established in 2002. It allows foreign access to China's equity markets with restrictions on investment ratios, quotas, targets, and capital remittance controls.

  2. The ARDA (Association of Religion Data Archives) shows that, in 2015, 38.8% of Chinese people identified as atheists and that China was ranked 8th in atheistic belief among 243 countries around the world. Source:

  3. See “CG watch: Corporate governance in Asia 2003” for more details, available at


  5. uses different weights to evaluate firms in the consumption, manufacturing, and service industry. For detailed evaluation process please refer to

  6. It is notable that in the multiple membership hierarchical linear model, the variables at higher levels are usually added into the model in the form of weight averages. However, the holdings of these QFIIs are already scaled by the total number of shares of each firm. Thus, we include the sum of religious QFII holdings and atheistic QFII holdings into the model.


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We thank the financial support of the National Natural Science Foundation of China under Grants Nos. 71720107001, 71673133, 72071102 and 71771117.


This study was funded by the National Natural Science Foundation of China.

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Correspondence to Ke Zhang.

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Variable Definitions



Dependent variables


The CSR scores are taken from the professional CSR evaluation platform A higher CSR score indicates that a listed company has better CSR performance


The CSR grade from A higher grade indicates that a company has better CSR performance


The component of a firm's CSR that involves customer responsibility, taken from


The component of a firm's CSR that involves employer responsibility, taken from


The component of a firm's CSR that involves environmental responsibility, taken from


The component of a firm's CSR involving social responsibility, taken from


The component of a firm's CSR involving shareholder responsibility, taken from

Testing variables


The holdings of religious QFIIs. First, based on the number of religious and atheistic individuals in a region, we determine whether the regions in which the examined QFIIs are located are religious or atheistic. Then, we classify each QFII’s holdings as religious if that investor is from a religious region


The holdings of atheistic QFIIs. We consider a QFIIs’ holdings to be atheistic if that investor is from an atheistic region


The holdings of Christian QFIIs. If the Christian population of a region is larger than any other religious population, we consider the holdings of the QFIIs from that region to be Christian


The holdings of QFIIs who practice other religions. If the largest religious population in the regions where QFIIs are from is not Christian, we consider these regions to be other religious regions and the holdings of the QFIIs from these regions to be the holdings of QFIIs who practice other religions

Further partition variables



Long/short-term holdings of religious QFIIs. We divide the holdings of religious QFIIs into long-term and short-term holdings based on the volatility of their investment horizons. We classify the QFIIs as long-term investors if they hold a stable portfolio. Otherwise, they are classified as short-term investors


Holdings of religious QFIIs as large/small shareholders. We define the holdings of a religious QFII as a large shareholders’ if the QFII holds more shares proportion than the median of all QFIIs' holding within the industry in the same year. Otherwise, we consider these holdings to be shares hold by religious QFIIs as small shareholders


The holdings of more/less committed religious QFIIs. We divide the holdings of religious QFIIs into more or less committed holdings based on the number of years they have entered Chinese stock market. We define the QFIIs as more committed investors if the number of years they have entered Chinese stock market more than the average number of years of entering across all the QFIIs. Otherwise, they are defined as less committed investors

Control variables


Property rights. If the firm is a state-owned enterprise, this variable equals 1; otherwise, this variable equals 0


Domestic institutional holdings. The ratio of the number of shares held by domestic institutions to the total number of shares


Managerial ownership. The ratio of the number of shares held by management to the total number of shares


First shareholder’s ownership. The ratio of the number of shares held by the first shareholder to the total number of shares


Firm size. This variable is measured by the natural log of a firm’s total assets


Listed age. The natural log of the number of years that a firm has been listed plus 1


Tobin’s Q. The ratio of market capitalization to total assets


Asset tangibility


Profitability. The ratio of earnings before interest and tax to total assets


Advertising cost. The ratio of advertising expenses to total assets


Capital expenditure ratio. The ratio of capital expenditures to total assets


Board size. The natural log of the total number of board directors plus 1


Board independence. The ratio of the number of independent board directors to the total number of board directors


Managers’ duality. If the chairman and CEO are the same person, this variable equals 1; otherwise, this variable equals 0


We use PCA to extract the principal components of the Environmental Performance Index, the Employment Laws Index, the Collective Relations Law Index, GDP per capita, and the ratio of market capitalization to GDP

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Zhao, X., Fang, L. & Zhang, K. How Foreign Institutional Shareholders' Religious Beliefs Affect Corporate Social Performance?. J Bus Ethics 178, 377–401 (2022).

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