ATTRACTION OR REPULSION: HOW INSTITUTIONAL OWNERS REACT TO CORPORATE SOCIAL PERFORMANCE

For years suspicions have abounded that institutional investors are notoriously short‐sighted when it comes to making their investment decisions. Faced with performance assessment on a monthly if not daily basis, institutional investors need to show timely results and hence may be under considerable pressure to improve short‐term payoff at the expense of long‐term performance. Because institutions today now own more than 50% of corporate equity, they wield an increasingly powerful influence on companies. This influence has recently been magnified with the emergence of activist institutions, lead by certain institutional investors such as CALPERS or TIAA‐CREF. As a result, there have been concerns among stakeholder groups and scholars that company decision makers will themselves yield to pressures to forego investments in longer‐term opportunities.