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Socially responsible investment funds and firm performance improvement

Tosun, Onur ORCID: https://orcid.org/0000-0003-2551-1408 and Moon, Katie 2024. Socially responsible investment funds and firm performance improvement. Review of Quantitative Finance and Accounting 10.1007/s11156-024-01352-7

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Abstract

We examine how Socially Responsible Investment (SRI) mutual funds emphasizing employee relations are associated with the performance of their portfolio firms, measured by return on assets (ROA). We highlight the important role of mutual-fund shareholders emphasizing employee relations by showing that firms’ ROA improves when their shares are owned by such shareholders. We find the shareholder participation of employee-focused SRI funds a potential channel leading to firm performance improvement. Our finding holds for stock return performance and is stronger in human-capital intense industries. Instrumental variable approaches using state-level constituency statutes, mutual fund inflows, or Morningstar ratings suggest a causal relation.

Item Type: Article
Date Type: Published Online
Status: In Press
Schools: Business (Including Economics)
Subjects: H Social Sciences > HG Finance
Publisher: Springer Verlag
ISSN: 0924-865X
Date of First Compliant Deposit: 1 January 2025
Date of Acceptance: 4 September 2024
Last Modified: 03 Jan 2025 11:59
URI: https://orca.cardiff.ac.uk/id/eprint/174930

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