How do institutional shareholders manipulate corporate environmental strategy to protect their equity value? A study of the adoption of ISO 14001 by Egyptian firms

Hayam Hassan Wahba

78 citations0/0 files storedBusiness Strategy and the Environment

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Corporate Social Responsibility Reporting Corporate Finance and Governance Environmental Sustainability in Business

Abstract

Abstract Theoretical as well as empirical evidence regarding the influence of institutional ownership on corporate environmental strategy not only is inconclusive but also reflects experience from either the Anglo‐American context or other developed countries. The underlying assumption of most of this literature is that institutional shareholders are always ‘active’ or ‘passive’ in their actions towards corporate environmental strategy. However, this study argues that this relationship might be moderated by various motivations such as legitimizing existence and operations, conforming with industry norms or lessening managerial entrenchment. Econometric analysis, using a sample of Egyptian firms, as hypothesized, demonstrated that institutional ownership exerted positive and significant effects on a corporation's tendency to adopt environmental management standards only when financial resources are available and investment opportunities are limited. A possible explanation of this finding is that Egyptian institutional investors are more likely to use corporate environmental responsibility to offset their inability to confront managerial discretionary power. An implication of this finding is that not only will different types of stakeholder ask for different levels of social and environmental responsibility, but also the same type of stakeholder may ask for different levels of social and environmental responsibility in different contexts. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1995Managing Legitimacy: Strategic and Institutional Approaches 1983Separation of Ownership and Control 2007The Social Responsibility of Business Is to Increase Its Profits 1997THE CORPORATE SOCIAL PERFORMANCE-FINANCIAL PERFORMANCE LINK 1988Outside directors and CEO turnover 2000Corporate social responsibility and financial performance: correlation or misspecification?1998The Influence of Institutional Investors on Myopic R&D Investment Behavior

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