The color of shareholders' money: Institutional shareholders' political values and corporate environmental disclosure |
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| Institution: | 1. Graduate School of International Studies, Sogang University, South Korea;2. College of Business, Korea Advanced Institute of Science and Technology (KAIST), South Korea;3. College of Business Administration, University of Seoul, South Korea;1. Lally School of Management, Rensselaer Polytechnic Institute, 110 8th Street, Pittsburgh Building, Troy, NY 12180-3590, United States;2. Gabelli School of Business, Fordham University, 45 Columbus Avenue, 5th Floor, New York, NY 10023, United States;3. Bank of Finland, Helsinki, FI 01001, Finland;4. Carey Business School, Johns Hopkins University, 100 International Drive, Baltimore, MD, 21202, United States |
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| Abstract: | In this study, we investigate whether and to what extent institutional shareholders' political values influence their investees' environmental disclosure and performance. Using employees' political donation data, we construct institutional investors' political ideology score, which higher (lower) value represents a more Republican- (Democratic)-leaning culture. We find that firms led by institutional shareholders with a more Republican-oriented political ideology are less likely to issue environmental reports. Such a negative effect is more pronounced for firms with institutional shareholders with long-term horizons, with high corporate Republican ideology scores, and without an environmental committee. We further find that institutional shareholders' Republican-oriented political values are negatively associated with their investee firms' environmental performance and green innovations. Overall, our results indicate that institutional shareholders' internal political polarization significantly influences corporate environmental disclosure policies. |
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