Tatiana Rodionova

The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies

Manuscript Type. Empirical. Research Question/Issue. We investigate the impact of family equity holdings on three indicators of corporate social responsibility: environmental, social, and governance (ESG) rankings. We further evaluate how firm governance mediates the effect of family ownership on environmental and social improvements and how national governance systems influence the response of family holdings to ESG. Research Findings/Insights. Based on a sample of 23,902 firm�?year observations drawn from 2002 to 2012 covering 46 countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and social rankings, but family ownership retains a significant negative association. These results are strong and consistent across liberal market economies (LME), whereas coordinated market economies (CME) exhibit generally weaker results and considerable diversity. Japan stands out as different from the other countries examined in depth. Theoretical/Academic Implications. Our results are consistent with agency relationships driving decisions concerning ESG commitment in LMEs. They also emphasize the role of institutional differences given the weak and variable association between ownership and ESG in CMEs. We show that families may be able to influence decisions, possibly through participation in management, despite normally effective governance constraints. As the impact of ownership and governance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the context of the economic environment. Practitioner/Policy Implications. Our results offer insights to regulators and policy makers who intend to improve ESG performance. The results suggest that encouraging diversified ownership is particularly important in LMEs, that improvements in governance may benefit social and environmental performance where equity is closely held by institutions, but that governance may be less effective in the presence of family ownership.

Do Responsible Investment Indices Improve Corporate Social Responsibility? FTSE4Good's Impact on Environmental Management

Manuscript Type. Empirical. Research Question/Issue. This study investigates the impact of a responsible investment index on environmental management practices. Firms that were included in the FTSE4Good index but failed to meet enhanced requirements were subject to both engagement by FTSE and the threat of expulsion from the index. We examine the combined effect of these actions, estimate the contribution of both elements separately, and the influence of concentrated equity ownership, corporate governance, and the institutional environment. We also evaluate whether the effect is persistent or transitory. Research Findings/Insights. For a sample of 1,029 firms from 21 countries, our findings demonstrate that engagement combined with the threat of expulsion from the FTSE4Good index doubles the probability that a firm failing to meet the environmental management criteria in 2002 would comply by 2005. The higher compliance rate for the firms receiving engagement persists until the end of our study in 2010. We also find that compliance is positively associated with low levels of concentrated ownership and with firms based in coordinated rather than liberal market economies. Theoretical/Academic Implications. Our results contribute to the understanding of the complexities of governance, where decision makers are constrained or influenced by equity holders, the firms governance system, institutional arrangements, and collective engagement by institutional equity holders. Our findings are consistent with both institutional and agency issues impacting on decision making. Practitioner/Policy Implications. Our study suggests that engagement via a responsible investment index reinforced by the threat of public expulsion from the index provides an effective route for large‐scale collaborative investor engagement on corporate social responsibility issues targeting large and internationally diverse firms. It also demonstrates why regulators may wish to encourage engagement of this type to achieve social benefits.

What type of controlling investors impact on which elements of corporate social responsibility

Using a large sample of 3541 companies drawn from 30 countries during the period from 2002 to 2010, we analysed the impact of strategic shareholdings on different elements of corporate social responsibility (CSR). We find that total strategic or closely held equity holdings adversely affect the environmental, social and governance scores provided by ASSET4. However, this effect is largely driven by entrenched and undiversified holdings such as family and corporate cross-holdings, whereas diversified institutional investments typically have an insignificant impact. The influence of undiversified holdings includes particularly strong negative impacts on measures that include climate change, environmental management, business ethics and human rights. Thus the impact of ownership on CSR performance differs depending on both the type of owner and the type of CSR.

The FTSE4Good Effect: The Impact of Responsible Investment Indices on Environmental Management

This paper provides results consistent with the proposition that engagement by and threat of deletion from a responsible investment index motivated persistent improvements to corporate environmental management practices, especially for firms where the threat of exclusion from the index was likely to be costly. We use the natural experiment provided by the FTSE4Good upgrade of their environmental management criteria in 2002 when they engaged with index member firms that would not meet the new requirements but did not engage with non-member firms that would similarly fail. By 2005 49% of the 388 large and internationally diverse firms that had received engagement and been threatened with exclusion from the FTSE4Good index had complied, as opposed to 23% of the 658 firms which were not subject to engagement or potential exclusion. This result is statistically significant even after controlling for environmental risk, industry, country, governance and financial performance. Further results indicate that the effect of FTSE engagement produces a difference in compliance which persists for at least five years.

The Influence of Family Ownership on Corporate Social Responsibility

Manuscript Type. Empirical. Research Question/Issue. We investigate the impact of family equity holdings on three indicators of corporate social responsibility: environmental, social, and governance (ESG) rankings. We further evaluate how firm governance mediates the effect of family ownership on environmental and social improvements and how national governance systems influence the response of family holdings to ESG. Research Findings/Insights. Based on a sample of 23,902 firm�?year observations drawn from 2002 to 2012 covering 46 countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and social rankings, but family ownership retains a significant negative association. These results are strong and consistent across liberal market economies (LME), whereas coordinated market economies (CME) exhibit generally weaker results and considerable diversity. Japan stands out as different from the other countries examined in depth. Theoretical/Academic Implications. Our results are consistent with agency relationships driving decisions concerning ESG commitment in LMEs. They also emphasize the role of institutional differences given the weak and variable association between ownership and ESG in CMEs. We show that families may be able to influence decisions, possibly through participation in management, despite normally effective governance constraints. As the impact of ownership and governance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the context of the economic environment. Practitioner/Policy Implications. Our results offer insights to regulators and policy makers who intend to improve ESG performance. The results suggest that encouraging diversified ownership is particularly important in LMEs, that improvements in governance may benefit social and environmental performance where equity is closely held by institutions, but that governance may be less effective in the presence of family ownership.

The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies: Families and CSR

Manuscript Type. Empirical. Research Question/Issue. We investigate the impact of family equity holdings on three indicators of corporate social responsibility: environmental, social, and governance (ESG) rankings. We further evaluate how firm governance mediates the effect of family ownership on environmental and social improvements and how national governance systems influence the response of family holdings to ESG. Research Findings/Insights. Based on a sample of 23,902 firm�?year observations drawn from 2002 to 2012 covering 46 countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and social rankings, but family ownership retains a significant negative association. These results are strong and consistent across liberal market economies (LME), whereas coordinated market economies (CME) exhibit generally weaker results and considerable diversity. Japan stands out as different from the other countries examined in depth. Theoretical/Academic Implications. Our results are consistent with agency relationships driving decisions concerning ESG commitment in LMEs. They also emphasize the role of institutional differences given the weak and variable association between ownership and ESG in CMEs. We show that families may be able to influence decisions, possibly through participation in management, despite normally effective governance constraints. As the impact of ownership and governance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the context of the economic environment. Practitioner/Policy Implications. Our results offer insights to regulators and policy makers who intend to improve ESG performance. The results suggest that encouraging diversified ownership is particularly important in LMEs, that improvements in governance may benefit social and environmental performance where equity is closely held by institutions, but that governance may be less effective in the presence of family ownership.