Skip to main content
SpringerLink
Log in

Ownership Concentration and CSR Policy of European Multinational Enterprises

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

This study investigates how ownership concentration in European multinational firms is associated with these firms’ corporate social responsibility (CSR). We employ factor analysis on responsibility data from EIRiS and use a regression analysis. Using firm-level data for almost 700 European firms, we find that shareholder concentration is significantly related to such policies. That is, more concentrated ownership goes hand in hand with poorer CSR policies. In our analysis, we control for size, leverage, profitability, industry, and country of origin. We use several indicators for ownership concentration. We also find that with more concentrated ownership, CSR of the firm gets worse. We suggest that especially with large shareholders, CSR would need to be included in their performance assessment.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK.

  2. See Table 4 in Appendix for an overview of the industries.

References

  • Adams, M., & Hardwick, P. (1998). An analysis of corporate donations: United Kingdom evidence. Journal of Management Studies, 35, 641–654.

    Article  Google Scholar 

  • Aguilera, R. V., Williams, C. A., Conley, J. M., & Rupp, D. E. (2006). Corporate governance and social responsibility: A comparative analysis of the UK and the US. Corporate Governance: An International Review, 14, 147–158.

    Article  Google Scholar 

  • Aoki, M. (1984). The cooperative game theory of the firm. Clarendon: Oxford.

    Google Scholar 

  • Atkinson, L., & Galaskiewicz, J. (1988). Stock ownership and company contributions to charity. Administrative Science Quarterly, 33, 82–100.

    Article  Google Scholar 

  • Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71–86.

    Article  Google Scholar 

  • Bartkus, B. R., Morris, S. A., & Seifert, B. (2002). Governance and corporate philanthropy: Restraining Robin Hood? Business Society, 41, 319–344.

    Google Scholar 

  • Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42, 488–506.

    Article  Google Scholar 

  • Bhagat, S., Black, B., & Blair, M. (2004). Relational investing and firm performance. Journal of Financial Research, 27, 1–30.

    Article  Google Scholar 

  • Black, B. S. (1992). Agents watching agents: The promise of institutional investor voice’. UCLA Law Review, 39, 811–893.

    Google Scholar 

  • Bolton, P., & von Thadden, E. L. (1998). Liquidity and control: A dynamic theory of corporate ownership structure. Journal of Institutional and Theoretical Economics, 154, 177–211.

    Google Scholar 

  • Brammer, S., & Millington, A. (2005). Corporate reputation and philanthropy: An empirical analysis. Journal of Business Ethics, 61, 29–44.

    Article  Google Scholar 

  • Brammer, J., Pavelin, S., & Porter, L. A. (2008). Corporate social performance and geographical diversification. Journal of Business Research, 59, 1025–1034.

    Article  Google Scholar 

  • Chatterji, A. K., Levine, D., & Toffel, M. W. (2009). How well do social ratings actually measure corporate social responsibility? Journal of Economics and Management Strategy, 18, 125–169.

    Article  Google Scholar 

  • Clark, G. L., & Hebb, T. (2005). Why should they care? The role of institutional investors in the market for corporate global responsibility. Environment and Planning A, 37, 2015–2031.

    Article  Google Scholar 

  • Coffey, B., & Fryxell, G. E. (1991). Institutional ownership of stock and dimensions of corporate social performance: An empirical examination. Journal of Business Ethics, 10, 437–444.

    Article  Google Scholar 

  • Cornett, M. M., Marcus, A. J., Saunders, A., & Tehranian, H. (2007). The impact of institutional ownership on corporate operating performance. Journal of Banking & Finance, 31, 1771–1794.

    Article  Google Scholar 

  • Dam, L. (2008). Corporate social responsibility and financial markets, PhD dissertation, University of Groningen, Groningen

  • Dam, L., Scholtens, B., & Sterken, E. (2007). Corporate covernance and international location decisions of multinational enterprises. Corporate Governance: An International Review, 15, 1329–1346.

    Article  Google Scholar 

  • David, P., Bloom, M., & Hillman, A. J. (2007). Investor activism, managerial responsiveness, and corporate social performance. Strategic Management Journal, 28, 91–100.

    Article  Google Scholar 

  • Derwall, J. (2007) Economic virtues of SRI and CSR. PhD dissertation, University of Maastricht, Maastricht

  • Donker, H., & Zahir, S. (2008). Towards an impartial and effective corporate governance rating system. Corporate Governance: The International Journal of Business in Society, 8, 83–93.

    Article  Google Scholar 

  • Faccio, M., & Lasfer, M. A. (2000). Do occupational pension funds monitor companies in which they hold large stakes? Journal of Corporate Finance, 6, 71–110.

    Article  Google Scholar 

  • Galaskiewicz, J. (1997). An urban grants economy revisited: Corporate charitable contributions in the Twin Cities, 1979–81, 1987–89. Administrative Science Quarterly, 42, 445–471.

    Article  Google Scholar 

  • Gomes, A., & W. Novaes (2005) Sharing of Control versus Monitoring as Corporate Governance Mechanisms. Penn Institute for Economic Research Working Paper 1–29, University of Pennsylvania, Pennsylvania.

  • Gompers, P., Ishii, J., & Metrick, A. (2003). Corporate governance and equity prices. Quarterly Journal of Economics, 118, 107–155.

    Article  Google Scholar 

  • Gorton, G., & Schmid, F. A. (2000). Universal banking and the performance of German banks. Journal of Financial Economics, 58, 29–80.

    Article  Google Scholar 

  • Graves, S. B., & Waddock, S. A. (1994). Institutional owners and corporate social performance. Academy of Management Journal, 37, 1034–1046.

    Google Scholar 

  • Harjoto, M. A., & Jo, H. (2011). Corporate governance and CSR nexus. Journal of Business Ethics, 100, 45–67.

    Article  Google Scholar 

  • Jensen, M. C., & Meckling, W. H. (1976). ‘Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

    Article  Google Scholar 

  • Jo, H., & Harjoto, M. A. (2011). Corporate governance and firm value: The impact of corporate social responsibility. Journal of Business Ethics, 103, 351–353.

    Article  Google Scholar 

  • Jo, H., & Harjoto, M. A. (2012). The causal effect of corporate governance on corporate social responsibility. Journal of Business Ethics, 106, 53–72.

    Article  Google Scholar 

  • Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42, 564–576.

    Article  Google Scholar 

  • Katz, B., & Owen, J. (2000) The emergence of concentrated ownership and the rebalancing of portfolios due to shareholder activism in a financial market equilibrium. Stern School of Business Working Paper SOR-2000-1, New York.

  • La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106, 1113–1155.

    Article  Google Scholar 

  • La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1999). Corporate ownership around the world. Journal of Finance, 54, 471–517.

    Article  Google Scholar 

  • Lehmann, E., Warning, S., & Weigand, J. (2004). Governance structures, multidimensional efficiency and firm profitability. Journal of Management and Governance, 8, 279–304.

    Article  Google Scholar 

  • Lehmann, E., & Weigand, J. (2000). Does the governed corporation perform better? Governance structures and corporate performance in Germany. European Finance Review, 4, 157–195.

    Article  Google Scholar 

  • Mahoney, L., & Roberts, R. W. (2007). Corporate social performance, financial performance and institutional ownership in Canadian firms. Accounting Forum, 31, 233–253.

    Article  Google Scholar 

  • Margolis, J. D., & Walsh, J. P. (2001). People and profits? The search for a link between a company’s social and financial performance. Greenwich, CT: Erlbaum.

    Google Scholar 

  • McWilliams, A., & Siegel, D. S. (2000). Corporate social responsibility and financial performance: Correlation or misspecification. Strategic Management Journal, 21, 603–609.

    Article  Google Scholar 

  • McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43, 1–18.

    Article  Google Scholar 

  • Neubaum, D. O., & Zahra, S. A. (2006). Institutional ownership and corporate social performance: The moderating effects of investment horizon, activism, and coordination. Journal of Management, 32, 108–131.

    Article  Google Scholar 

  • Ryan, L. V., & Schneider, M. (2002). The antecedents of institutional investor activism. Academy of Management Review, 27, 554–573.

    Google Scholar 

  • Scholtens, B. (2008). A note on the interaction between corporate social responsibility and financial performance. Ecological Economics, 68, 46–55.

    Article  Google Scholar 

  • Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94, 461–488.

    Article  Google Scholar 

  • Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52, 737–783.

    Article  Google Scholar 

  • Stiglitz, J. E. (1985). Credit markets and the control of capital. Journal of Money, Credit and Banking, 17, 133–152.

    Article  Google Scholar 

  • Ullmann, A. A. (1985). Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of U.S. firms. Academy of Management Review, 10, 540–557.

    Google Scholar 

  • Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18, 303–319.

    Article  Google Scholar 

  • Wahal, S. (1996). Public pension fund activism and firm performance. Journal of Financial & Quantitative Analysis, 3, 1–23.

    Article  Google Scholar 

  • Wood, D. J. (2010). Measuring corporate social performance: A review. International Journal of Management Reviews, 12, 50–84.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Energy and Sustainability Centre, Department of Economics, Econometrics and Finance, Faculty of Economics and Business, University of Groningen, P.O. Box 800, 9700 AV, Groningen, The Netherlands

    Lammertjan Dam & Bert Scholtens

Authors
  1. Lammertjan Dam
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Bert Scholtens
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Bert Scholtens.

Appendix

Appendix

The complete dataset covers the following topics: Environmental policy, Environmental management, Environmental reporting, Environmental performance, Chemicals of concern, Ozone depleting chemicals, Greenhouse gases, Mining and quarrying, Nuclear power, Pollution convictions, Roads, Tropical hardwood, Water pollution, Governance, Board practice, Bribery and corruption, Codes of ethics, Directors’ pay, Disclosure, Political donations, Responsibility for stakeholders, Women on the board, Human rights overall, Human rights policy, Human rights systems, Human rights reporting, Human rights principles, Core ILO standards, Supply chain overall, Supply chain elements, Positive products and services, Stakeholder issues, Stakeholder policy, Stakeholder systems, Stakeholder engagement, Stakeholder reporting, Employee issues, Equal opportunities, Health and safety, Job creation and security, Trade unions and employee participation, Training, Customers and suppliers, Advertising complaints, Customer/supplier relations, Community involvement, and Other ethical concerns: Alcohol, Animal testing, Business Details, Contraception/abortion/clinics, Anti-personnel landmines, Financial institutions, Fur, Gambling, Genetic engineering, Intensive farming and meat sale, Military production and sale, Pornography and adult entertainment services, Size, Third world, and Tobacco. We selected 20 indicators of which detailed definitions are given below. The inclusion in our final dataset is mainly driven by data availability and consistency, since not every company scores on each issue See Tables 3, 4, and 5.

Table 3 Details of the ethical investment research services (EIRiS) dataset
Full size table
Table 4 Industries and distribution of firms in the sample
Full size table
Table 5 Summary of factor analysis for social responsibility indicators
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Dam, L., Scholtens, B. Ownership Concentration and CSR Policy of European Multinational Enterprises. J Bus Ethics 118, 117–126 (2013). https://doi.org/10.1007/s10551-012-1574-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-012-1574-1

Keywords

Search

Navigation