“Do Institutional Investors Drive Corporate Social Responsibility? International Evidence” (Dyck, Alexander, Karl V. Lins, Lukas Roth, And Hannes F. Wagner, 2019) Flashcards
- In an ESG-conscious world, institutional investors are starting to pay more attention to whether or not firms like KLM are engaging in E&S activities. In the context of “Do Institutional Investors Drive Corporate Social Responsibility? International Evidence” (Dyck et al., 2019):
(i) An individual institutional investor based in the US is considering influencing the E&S performance of firm KLM. Will the impact be evident? Why?
A) Yes, because US investors have a strong domestic impact.
B) No, because US investors primarily influence foreign firms with stronger social norms.
C) Yes, because all institutional investors push firms towards stronger ESG performance.
D) No, because institutional investors have no impact on E&S performance.
B
A different institutional investor from Slovenia sees suboptimal E&S performance in firm KLM. What are possible mechanisms in the article that the institutional investor can use to demand change?
A) Voice (engagement with the firm), Exit (selling shares), and Selection (choosing firms with good E&S performance).
B) Only Exit and Selection, since Voice is ineffective.
C) Only shareholder activism and public campaigns.
D) None, since institutional investors do not affect E&S performance.
A) Voice (engagement with the firm), Exit (selling shares), and Selection (choosing firms with good E&S performance).
In the paper “Do Institutional Investors Drive Corporate Social Responsibility?”, 2019, what significant result is found regarding the relationship between institutional ownership and firms’ E&S performance?
A) No significant relationship exists between institutional ownership and E&S performance.
B) Greater institutional ownership is associated with lower firm-level E&S scores.
C) Greater institutional ownership is associated with higher firm-level E&S scores.
D) Institutional ownership only affects E&S performance in Asian firms.
E) Institutional ownership has a diminishing effect on E&S performance over time.
C) Greater institutional ownership is associated with higher firm-level E&S scores.
In the paper “Do Institutional Investors Drive Corporate Social Responsibility?”, 2019, what does the author indicate about the variation in firms’ E&S performance?
A) E&S performance is uniform across all countries, industries, and time.
B) E&S performance varies significantly across countries, industries, and time.
C) E&S performance is only variable across industries.
D) E&S performance varies based on the firm’s size and age.
E) E&S performance is primarily influenced by regional environmental regulations.
B) E&S performance varies significantly across countries, industries, and time.
How does the paper determine that financial motivation plays a role in institutional investors pushing for E&S improvements?
A) By observing a decrease in E&S performance following the global financial crisis.
B) By noting an increase in E&S performance following the global financial crisis.
C) By comparing E&S performance before and after changes in government regulations.
D) By interviewing CEOs about their motivations for E&S performance.
E) By analyzing stock price reactions to changes in E&S performance.
B) By noting an increase in E&S performance following the global financial crisis.
What assumption does the paper make about the impact of institutional investors’ strategies on E&S performance?
A) Strategies have a neutral impact on E&S performance.
B) Only negative screening strategies are effective.
C) Positive screening strategies limit the scope for institutions to improve E&S performance once they become owners.
D) Institutions have no scope to improve E&S performance due to their investment size.
E) Positive screening strategies are the most effective in improving E&S performance.
C) Positive screening strategies limit the scope for institutions to improve E&S performance once they become owners.
According to the paper, how do social norms influence institutional investors’ impact on E&S performance?
A) Investors from countries with weak E&S norms push for higher E&S performance.
B) Investors from countries with strong E&S norms have a greater impact on firm-level E&S performance.
C) All investors push for E&S performance regardless of their country of origin.
D) Only US institutional investors significantly influence E&S performance.
B) Investors from countries with strong E&S norms have a greater impact on firm-level E&S performance.
What mechanism was identified as the dominant method institutional investors use to influence firms’ E&S performance?
A) Public shareholder activism.
B) Private engagement with firms.
C) Government lobbying.
D) Negative screening of poor E&S performers.
B) Private engagement with firms.
What was the effect of the BP Deepwater Horizon oil spill on institutional investors’ E&S engagement?
A) It reduced institutional investors’ focus on E&S performance.
B) It increased institutional investors’ awareness of financial risks related to E&S issues.
C) It had no measurable impact on investor behavior.
D) It led to a decline in E&S performance among firms in extractive industries.
B) It increased institutional investors’ awareness of financial risks related to E&S issues.
What was one key finding regarding pension funds’ role in E&S performance?
A) Pension funds had no measurable effect on E&S performance.
B) Pension funds influenced E&S performance regardless of the country they were in.
C) Pension funds were only influential in the United States.
D) Pension funds engaged in negative screening rather than active engagement.
B) Pension funds influenced E&S performance regardless of the country they were in.
Which of the following statements about institutional investors’ influence on E&S performance is TRUE?
A) Institutional investors only improve E&S performance when government regulations force them to do so.
B) Institutional investors from Europe had a much stronger influence on E&S than those from the US.
C) The impact of institutional investors on E&S performance was strongest in the technology sector.
D) Institutional investors preferred to use public activism rather than private engagement.
B) Institutional investors from Europe had a much stronger influence on E&S than those from the US.
What method did the authors use to establish causality between institutional ownership and E&S performance?
A) Surveys of company executives.
B) Randomized controlled trials.
C) A quasi-natural experiment using the BP Deepwater Horizon oil spill.
D) Direct interviews with institutional investors.
C) A quasi-natural experiment using the BP Deepwater Horizon oil spill.
What was the impact of the financial crisis (2008-2009) on institutional investors’ push for E&S improvements?
A) The crisis reduced institutional investors’ attention to E&S performance.
B) The crisis increased the financial importance of E&S performance, leading to greater investor pressure.
C) The crisis had no impact on institutional investors’ E&S behavior.
D) Investors moved away from E&S concerns in favor of short-term profit maximization.
B) The crisis increased the financial importance of E&S performance, leading to greater investor pressure.
What is an example of negative screening as a mechanism of influence?
A) Investing only in firms with high E&S scores.
B) Selling shares in companies with poor E&S performance.
C) Engaging with company management to improve E&S.
D) Voting against management proposals at shareholder meetings.
B) Selling shares in companies with poor E&S performance.
Which firms saw the most significant increase in E&S performance due to institutional ownership?
A) Firms that already had high E&S scores.
B) Firms with low initial E&S scores.
C) Firms in the US financial sector.
D) Firms that were not publicly traded.
B) Firms with low initial E&S scores.
