Local Shareholders, Corporate Community Responsibility, and Shareholder Value

• In Event: Research with an Impact on Scholarship: Reporting, Valuation, and Markets

Abstract

This paper shows that local shareholders lead firms to engage in corporate social responsibility practices locally – corporate community responsibility (CCR). We find that mutual funds investing in local firms tend to increase CCR. Local shareholders and their firms employ CCR as business strategy to benefit themselves financially. We show that a firm’s CCR practices tend to increase Tobin’s Q and operating cash flows, especially in the consumer-oriented industries where customer relations are critical. In addition, local shareholders with higher CCR investments are likely to attract greater fund flows. Finally, we discuss possible mechanisms through which local shareholders influence over firms’ CCR policy.

Authors

• Hyun Gon Kim, Rutgers, School of Business - Camden

• Hyoseok (David) Hwang, Rutgers, School of Business - Camden

• Jung Yeun Kim, Rutgers University - Camden