Does Ownership Structure Matter? The Effects of Insider and Institutional Ownership on Corporate Social Responsibility

The extant literature has examined the effects of ownership structures on corporate social responsibility (CSR), yet it has overlooked the non-linear and interactive effects among major shareholder groups. In this study, we examine the non-linear effects of insider and institutional ownerships on CSR. We also examine whether it is necessary to have both incentive alignment and monitoring mechanisms (complementary view) or it is sufficient to have either mechanism (substitutive view) to promote CSR. Using a sample of the U.S. Fortune 1000 firms, our results suggest that insider and institutional ownerships have non-linear effects on CSR. We also find support for the complementary mechanisms view, in that the highest CSR rating is observed when both ownership levels are high. Therefore, firms need to maintain strong governance structures to realize synergistic effects in promoting CSR. Our findings provide a more in-depth understanding of the relationships between ownership structures and corporate social outcomes.