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Do foreign institutional investors drive corporate social responsibility? Evidence from listed firms in China / Zhe Li, Ping Wang, Tianlong Wu

Journal of Business Finance & Accounting, Volume: 48, Issue: 1-2, Pages: 338 - 373

Swansea University Author: Zhe Li

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DOI (Published version): 10.1111/jbfa.12481

Abstract

This paper investigates the effect of qualified foreign institutional investors (QFIIs) on corporate social responsibility (CSR) within the context of listed firms in China. We find that QFIIs offer an incisive channel for improving socially responsible practices. In addition, we find that firms wit...

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Published in: Journal of Business Finance & Accounting
ISSN: 0306-686X 1468-5957
Published: Wiley 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa56150
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Abstract: This paper investigates the effect of qualified foreign institutional investors (QFIIs) on corporate social responsibility (CSR) within the context of listed firms in China. We find that QFIIs offer an incisive channel for improving socially responsible practices. In addition, we find that firms with QFIIs are more likely to comply with the Global Reporting Initiative (GRI) guidelines, and that their sustainability reports tend to be longer. We also find that this positive effect is more pronounced in firms with low initial CSR scores than those with high CSR scores at the time when QFIIs enter the sample. Our empirical evidence further confirms that this positive impact is driven by QFIIs from countries with high social awareness, or QFIIs from geographically distant countries, consistent with their motives, and is linked to the ownership of QFIIs, especially when the QFII is among the top ten of the largest shareholders. Finally, our extended analysis reveals that the increase in CSR performance associated with the presence of QFIIs results in greater firm performance and easier access to finance.
Keywords: Qualified foreign institutional investors; corporate social responsibility; social awareness; information asymmetry; capital market benefits
College: School of Management
Issue: 1-2
Start Page: 338
End Page: 373