Abstract
Purpose:
Existing research claims that institutional investors view corporate social responsibility (CSR) as an important mechanism in measuring corporate legitimacy. Yet, broader research on how retail investors (RIs) respond to CSR remains scarce. This study aims to investigate the perception of CSR-related investment criteria among RIs and how RIs in different societal contexts prioritize their investment decisions regarding CSR.
Design/methodology/approach:
The study examines how RIs from China, Germany, Brazil and the USA (n = 452) prioritize CSR when making investment decisions. CSR is measured through environmental, social and governance (ESG) activities, as defined by Bloomberg’s and Dow Jones’ social behavioral indexes and viewed through the lens of legitimacy theory. The ESG prioritization was conducted using the choice-experiment method, which is suitable for investigative and multi-criteria contexts.
Findings:
The findings reveal an inconsistency that challenges academic beliefs regarding CSR, suggesting that what is suitable for firms (e.g. gender diversity on boards and union collaboration) appeals to all investors. Yet, this is refuted among RIs. Widely accepted business practices and ESG activities are not perceived in the same way by RIs.
Practical implications:
The significant differences regarding Ris’ ESG preferences between sample groups can be helpful to executives managing investor relations. Firms could adjust their CSR reports to target each investor category, just like market communication is adjusted to appeal to different target groups. Correctly designed, this could increase firms’ legitimacy, investment image, corporate reputation and financial performance.
Originality/value:
The research reveals that RIs prioritize ESG activities differently in their decision-making criteria than the mainstream knowledge body. The results show that what is commonly accepted as essential for institutional investors is unimportant to RIs. RIs deprioritize, e.g. gender equity on boards, which, according to the broader literature and contemporary press, is beneficial to organizations. This represents a “dark side” where there is a discrepancy between what firms believe to be important to all investor categories and how CSR programs are designed.
Existing research claims that institutional investors view corporate social responsibility (CSR) as an important mechanism in measuring corporate legitimacy. Yet, broader research on how retail investors (RIs) respond to CSR remains scarce. This study aims to investigate the perception of CSR-related investment criteria among RIs and how RIs in different societal contexts prioritize their investment decisions regarding CSR.
Design/methodology/approach:
The study examines how RIs from China, Germany, Brazil and the USA (n = 452) prioritize CSR when making investment decisions. CSR is measured through environmental, social and governance (ESG) activities, as defined by Bloomberg’s and Dow Jones’ social behavioral indexes and viewed through the lens of legitimacy theory. The ESG prioritization was conducted using the choice-experiment method, which is suitable for investigative and multi-criteria contexts.
Findings:
The findings reveal an inconsistency that challenges academic beliefs regarding CSR, suggesting that what is suitable for firms (e.g. gender diversity on boards and union collaboration) appeals to all investors. Yet, this is refuted among RIs. Widely accepted business practices and ESG activities are not perceived in the same way by RIs.
Practical implications:
The significant differences regarding Ris’ ESG preferences between sample groups can be helpful to executives managing investor relations. Firms could adjust their CSR reports to target each investor category, just like market communication is adjusted to appeal to different target groups. Correctly designed, this could increase firms’ legitimacy, investment image, corporate reputation and financial performance.
Originality/value:
The research reveals that RIs prioritize ESG activities differently in their decision-making criteria than the mainstream knowledge body. The results show that what is commonly accepted as essential for institutional investors is unimportant to RIs. RIs deprioritize, e.g. gender equity on boards, which, according to the broader literature and contemporary press, is beneficial to organizations. This represents a “dark side” where there is a discrepancy between what firms believe to be important to all investor categories and how CSR programs are designed.
| Original language | English |
|---|---|
| Pages (from-to) | 1-5 |
| Number of pages | 5 |
| Journal | European Business Review |
| DOIs | |
| Publication status | Published - 2025 |
