Abstract
Corporate social responsibility (CSR) involvement and disclosure has been becoming increasingly popular among US public firms, including those that qualify as real estate investment trusts (REITs). This paper aims to discover the relationship between CSR involvement and potential determinants such as growth opportunities, profitability, visibility, and agency costs. Types of CSR involvement are assessed in terms of environmental, community, and governance disclosures and are quantified using word count from the company’s voluntary disclosure. Our results support the hypothesis that CSR has a strategic element and that REITs have greater CSR involvement when they have greater growth and investment opportunities. When the type of disclosure is broken into subcategories, the results show that not all dimensions of CSR are alike: environmental, community, and governance CSR disclosures appear to be motivated by different sets of incentives and reasons.
Similar content being viewed by others
Notes
To qualify as a REIT, the company also need to meet another three tests: (1) a REIT must have at least 75% of its assets invested in real estate, mortgage loans, shares in other REITs, cash or government securities; (2) a REIT must derive at least 75% of its gross income from real estate activities; and (3) a REIT must have at least 100 shareholders and less than 50% of the shares concentrated in five or fewer shareholders.
Bénabou and Tirole (2010) provide an analysis of individual social responsibility versus corporate social responsibility.
This study mobilizes the legitimacy theory in hypotheses H3, H4, and H5. These hypotheses outline conscious actions that are used to legitimize a firm’s continued existence. The new (or neo) institutionalism theory (e.g., Deephouse 1996; DiMaggio and Powell 1991; Meyer and Rowan 1991; Scott 1991), however, emphasizes that social environment shapes organizational structure. The so-called isomorphism increases organizational legitimacy in the sense that a firm’ actions relating to legitimacy are often undertaken unconsciously.
Mortgage REITs are excluded due to their fixed-income nature.
Limited dependent variable regression is quite standard in econometrics. Details about this method can be found in Greene (1997).
We do not report the table of correlation coefficients in the interest of brevity; the table is available upon request.
Market capitalization also exhibits fairly high correlation coefficients with the number of analysts and media coverage. Therefore, we repeat subsequent analyses without the inclusion of market capitalization. The unreported results are qualitatively similar.
References
Abbott, W. F., & Monsen, R. J. (1979). On the measurement of corporate social responsibility: Self-reported disclosures as a method of measuring corporate social involvement. Academy of Management Journal, 22, 501–515.
Aivazian, V. A., Ge, Y., & Qiu, J. (2005). The impact of leverage on firm investment: Canadian evidence. Journal of Corporate Finance, 11, 277–291.
Asongu, J. J. (2007). Innovation as an argument for corporate social responsibility. Journal of Business and Public Policy, 1, 1–21.
Baker, M., & Wurgler, J. (2002). Marketing timing and capital structure. Journal of Finance, 57, 1–32.
Bansal, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47, 93–103.
Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71–86.
Barnett, M. L. (2007). Stakeholder influence capacity and the variability of financial returns to corporate social responsibility. Academy of Management Review, 32, 794–816.
Belkaoui, A., & Karpik, P. G. (1989). Determinants of the corporate decision to disclose social information. Accounting, Auditing and Accountability Journal, 2, 36–51.
Bénabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. Economica, 77, 1–19.
Bernstein, H. (2009). Greening of Corporate America. New York: McGraw Hill Construction.
Blumenstock, J. E. (2008). Size matters: World count as a measure of quality on Wikipedia. In Proceedings of the 17th ACM international conference on the World Wide Web (WWW) (pp. 1095–1096). New York: ACM Press.
Bowen, F. (2000). Environmental visibility: A trigger of green organizational response? Business Strategy and the Environment, 9, 92–107.
Brown, N., & Deegan, C. (1998). The public disclosure of environmental performance information—A dual test of media agenda setting theory and legitimacy theory. Accounting and Business Review, 29, 21–41.
Campbell, J. L., Chen, H., Dhaliwal, D. S., Lu, H., & Steele, L. B. (2014). The information content of mandatory risk factor disclosures in corporate filings. Review of Accounting Studies, 19, 396–455.
Cannon, S., & Vogt, S. (1995). REITs and their management: An analysis of organizational structure. Journal of Real Estate Research, 10, 297–317.
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4, 497–505.
Case, B., Colwell, P. F., Leishman, C., & Watkins, C. (2006). Real Estate Economics, 34, 77–107.
Chan, M. C., Watson, J., & Woodliff, D. (2014). Corporate governance quality and CSR disclosure. Journal of Business Ethics, 125, 59–73.
Cormier, D., Gordon, I. M., & Magnan, M. (2004). Corporate environmental disclosure: Contrasting management’s perceptions with reality. Journal of Business Ethics, 49, 143–165.
Cowen, S. S., Ferreri, L. B., & Parker, L. D. (1987). The impact of corporate characteristics on social responsibility disclosure A typology and frequency-based analysis. Accounting, Organizations and Society, 12, 111–122.
Cragg, J. G., & Malkiel, B. G. (1982). Expectations and the structure of share prices. Chicago, IL: University of Chicago Press.
Cullen, L., & Christopher, T. (2002). Governance disclosures and firm characteristics of listed Australian mining companies. International Journal of Business Studies, 10, 37–58.
De Roeck, K., & Delobbe, N. (2012). Do environmental CSR initiatives serve organizations’ legitimacy in the oil industry? Exploring employees’ reactions through organizational identification theory. Journal of Business Ethics, 110, 397–412.
Deephouse, D. L. (1996). Does isomorphism legitimate? Academy of Management Journal, 39, 1024–1039.
Deng, X., Kang, J., & Low, B. S. (2013). Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics, 110, 87–109.
Dermisi, S. V. (2009). Effect of LEED ratings and levels on office property assessed and market values. Journal of Sustainable Real Estate, 1, 23–47.
Di Giuli, A., & Kostovetsky, L. (2014). Are red or blue companies more likely to go green? Politics and corporate social responsibility. Journal of Financial Economics, 111, 158–180.
DiMaggio, P. J., & Powell, W. W. (1991). Introduction. In P. J. DiMaggio & W. W. Powell (Eds.), The new institutionalism in organizational analysis. Chicago: University of Chicago Press.
Downs, D. H., & Güner, N. Z. (2006). On the quality of FFO forecasts. Journal of Real Estate Research, 28, 257–274.
Eichholtz, P., Kok, N., & Quigley, J. M. (2010). Doing well by doing good? Green office buildings. American Economic Review, 100, 2492–2509.
Ettlie, J. E., & Rubenstein, A. H. (1987). Firm size and product innovation. Journal of Product Innovation Management, 4(2), 89–108.
Falkenbach, H., Lindholm, A., & Schleich, H. (2010). Environmental sustainability: Drivers for the real estate investor. Journal of Real Estate Literature, 18, 203–223.
Flammer, C. (2013). Corporate social responsibility and shareholder reaction: The environmental awareness of investors. Academy of Management Journal, 56, 758–781.
Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder theory and the corporate objective revisited. Organization Science, 15, 364–369.
Fuerst, F., & McAllister, P. (2009). An investigation of the effect of eco-labeling on office occupancy rates. Journal of Sustainable Real Estate, 1, 50–64.
Fuerst, F., & McAllister, P. (2011). Green noise or green value? Measuring the effects of environmental certification on office values. Real Estate Economics, 39, 45–69.
Gompers, P. A., Ishii, J., & Metrick, A. (2010). Extreme governance: An analysis of dual-class firms in the United States. Review of Financial Studies, 23, 1051–1088.
Gore, R., & Stott, D. (1988). Toward a more informative measure of operating performance in the REIT industry: Net income vs. funds from operations. Accounting Horizons, 12, 323–339.
Gray, R., Kouhy, R., & Lavers, S. (1995). Corporate social and environmental reporting: A review of the literature and a longitudinal study of UK disclosure. Accounting, Auditing & Accountability Journal, 8(2), 47–77.
Grayson, D., & Hodges, A. (2004). Corporate social opportunity! 7 steps to make corporate social responsibility work for your business. Sheffield: Greenleaf.
Greene, W. H. (1997). Econometric analysis (3rd ed.). Upper Saddle River, NJ: Prentice Hall.
Gregory, A., Tharyan, R., & Whittaker, J. (2014). Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics, 124, 633–657.
Hackston, D., & Milne, M. J. (1996). Some determinants of social and environmental disclosures in New Zealand companies. Accounting, Auditing & Accountability Journal, 9, 77–108.
Han, B. (2006). Insider ownership and firm value: Evidence from real estate investment trusts. Journal of Real Estate Finance and Economics, 32, 471–493.
Harjoto, M. A., & Jo, H. (2015). Legal vs. normative CSR: Differential impact on analyst dispersion, stock return volatility, cost of capital, and firm value. Journal of Business Ethics, 128, 1–20.
Howe, J., & Shilling, J. (1990). REIT advisor performance. AREUEA Journal, 18, 479–499.
Hsieh, C., & Sirmans, C. F. (1991). REITs as captive-financing affiliates: Impact on financial performance. Journal of Real Estate Research, 6, 179–189.
Husted, B. W. (2005). Risk management, real options, corporate social responsibility. Journal of Business Ethics, 60, 175–183.
Jarrell, G. A., & Poulsen, A. B. (1988). Dual-class recapitalizations as antitakeover mechanisms. Journal of Financial Economics, 20, 129–152.
Jawahar, J. M., & McLaughlin, G. L. (2001). Toward a descriptive stakeholder theory: An organizational life cycle approach. Academy of Management Review, 26, 397–414.
Jenkins, H. (2009). A ‘business opportunity’ model of corporate social responsibility for small- and medium-sized enterprises. Business Ethics: A European Review, 18, 21–36.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.
Jo, H., & Harjoto, M. A. (2011). Corporate governance and firm value: The impact of corporate social responsibility. Journal of Business Ethics, 103, 351–383.
Jo, H., & Na, H. (2012). Does CSR reduce firm risk? Evidence from controversial industry sectors. Journal of Business Ethics, 110, 441–456.
Jones, D., Willness, C., & Madey, S. (2014). Why are job seekers attracted by corporate social performance? Experimental and field tests of three signal-based mechanisms. Academy of Management Journal, 57, 383–404.
Jung, K., Kim, Y., & Stulz, R. (1996). Timing, investment opportunities, managerial discretion, and the security issue decision. Journal of Financial Economics, 42, 159–181.
Knox, S., Maklan, S., & French, P. (2006). Corporate social responsibility: Exploring stakeholder relationships and programme reporting across leading FTSE companies. Journal of Business Ethics, 61, 7–28.
Kotler, P., & Lee, N. (2005). Corporate social responsibility: Doing the most good for your company and your cause. Hoboken, NJ: Wiley.
Lang, L., Ofek, E., & Stulz, R. M. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40, 3–29.
Line, M., Hawley, H., & Krut, R. (2002). Development in global environmental and social reporting. Corporate Environmental Strategy, 9, 69–78.
Ling, D. C., & Archer, W. R. (2010). Real estate principles: A value approach. New York, NY: McGraw-Hill Irwin.
Litzenberger, R. H., & Rao, C. U. (1971). Estimates of the marginal rate of time preference and average risk aversion of investors in electric utility shares: 1960–1966. Bell Journal of Economics and Management Science, 2, 265–277.
Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10-Ks. Journal of Finance, 66, 35–65.
Lutzkendorf, T., & Lorenz, D. (2007). Integrating sustainability into property risk assessments for market transformation. Building Research & Information, 35, 644–661.
Mason, C., & Simmons, J. (2014). Embedding corporate social responsibility in corporate governance: A stakeholder systems approach. Journal of Business Ethics, 119, 77–86.
McConnell, J. J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27, 595–612.
McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26, 117–127.
Meyer, J. W., & Rowan, B. (1991). Institutional organizations: Formal structure as myth and ceremony. In P. J. DiMaggio & W. W. Powell (Eds.), The new institutionalism in organizational analysis. Chicago: University of Chicago Press.
Mishra, S., & Modi, S. B. (2013). Positive and negative corporate social responsibility, financial leverage, and idiosyncratic risk. Journal of Business Ethics, 117, 431–448.
Morck, R. K., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.
Neu, D., Warsame, H., & Pedwell, K. (1998). Managing public impressions: Environmental disclosures in annual reports. Accounting, Organizations and Society, 23, 265–282.
Newell, G., & Lee, C. L. (2012). Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia. Journal of Property Investment & Finance, 30, 389–403.
Newell, G., Peng, H. W., & Yam, S. (2011). Assessing the linkages between corporate social responsibility and A-REIT performance. Pacific Rim Property Research Journal, 17, 370–387.
Partch, M. (1987). The creation of a class of limited voting common stock and shareholder wealth. Journal of Financial Economics, 18, 313–339.
Patten, D. M. (2002). Media exposure, public policy pressure, and environmental disclosure: An examination of the impact of tri data availability. Accounting Forum, 26, 152–171.
Penman, S. H. (1996). The articulation of price-earnings ratios and market-to-book ratios and the evaluation of growth. Journal of Accounting Research, 34, 235–259.
Perrow, C. (1970). Organizational analysis: A sociological view. Belmont, CA: Tivastock.
Pivo, G. (2007). Exploring responsible property investing: A survey of American executives. Corporate Social Responsibility and Environmental Management, 15, 235–248.
Pivo, G., & Fisher, J. D. (2010). Income, value, and returns in socially responsible office properties. Journal of Real Estate Research, 32, 243–270.
Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84, 78–93.
Reichardt, A., Fuerst, F., Rottke, N. B., & Zietz, J. (2012). Sustainable building certification and the rent premium: A panel data approach. Journal of Real Estate Research, 34, 99–126.
Reverte, C. (2009). Determinants of corporate social responsibility disclosure ratings by Spanish listed firms. Journal of Business Ethics, 88, 351–366.
Roberts, R. W. (1992). Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting, Organizations and Society, 17(6), 595–612.
Rogers, J. L., Van Buskirk, A., & Zechman, S. L. C. (2011). Disclosure tone and shareholder litigation. Accounting Review, 86, 2155–2183.
Scott, W. R. (1991). Unpacking institutional arguments. In P. J. DiMaggio & W. W. Powell (Eds.), The new institutionalism in organizational analysis. Chicago: University of Chicago Press.
Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29, 569–592.
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52, 737–783.
Smith, C. W., & Watts, R. L. (1992). The investment opportunity set and corporate financing, dividend, and compensation polices. Journal of Financial Economics, 32, 263–292.
Stulz, R. M. (1988). Managerial control of voting rights: Financing policies and the market for corporate control. Journal of Financial Economics, 20, 25–54.
Tetlock, P. C., Saar-Tsechansky, M., & Macskassy, S. (2008). More than words: Quantifying language to measure firms’ fundamentals. Journal of Finance, 63, 1437–1467.
Turban, D. B., & Greening, D. W. (1997). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40, 658–672.
Ullmann, A. A. (1985). Data in search of a theory: A social examination of the relationships among social performance, social disclosure, and economic performance of U.S. firms. Academy of Management Review, 10(3), 540–557.
Valentine, S., & Fleischman, G. (2008a). Ethics programs, perceived corporate social responsibility and job satisfaction. Journal of Business Ethics, 77, 159–172.
Valentine, S., & Fleischman, G. (2008b). Professional ethical standards, corporate social responsibility, and the perceived role of ethics and social responsibility. Journal of Business Ethics, 82, 657–666.
Vincent, L. (1999). The informational content of funds from operations (FFO) for real estate investment trusts (REITs). Journal of Accounting and Economics, 26, 69–104.
Wachter, S. M., & Wong, G. (2008). What is a tree worth? Green-city strategies, signaling and house prices. Real Estate Economics, 36, 213–239.
Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Englewood Cliffs, NJ: Prentice-Hall.
Wei, P., Hsieh, C., & Sirmans, C. F. (1995). Captive financing arrangements and information asymmetry: The case of REITs. Real Estate Economics, 23, 385–394.
Wiley, J. A., Benefield, J. D., & Johnson, K. H. (2010). Green design and the market for commercial office space. Journal of Real Estate Finance and Economics, 41, 228–243.
You, H., & Zhang, X. (2009). Financial reporting complexity and investor under reaction to 10-K information. Review of Accounting Studies, 14, 559–586.
Author information
Authors and Affiliations
Corresponding author
Appendix
Appendix
The explanatory variables used in this study are defined as follows.
Book-to-market the ratio of the book value of equity to market capitalization.
Total debt/total assets the ratio of total debt to total assets.
Beta the market beta of equity.
ROA the ratio of net income to total assets.
FFO/total assets the ratio of funds from operations to total assets.
#News the number of news articles received.
#Analysts the number of analysts following the firm.
Ln(Size) the logarithm of market capitalization.
Blue state coded one (zero) if the firm’s home state went to Democratic (Republican) Party in the 2012 US presidential election.
Individual tenants coded one (zero) when the firm mainly deals with individual (corporate) tenants.
%Insider insider ownership.
%Insider2 the square of insider ownership.
Self-advised coded one (zero) if the firm is (not) self-advised.
UPREIT coded one (zero) if the firm is (not) an umbrella partnership REIT.
Staggered board coded one (zero) when the firm (does not) has a staggered board that consists of multiple classes of shares.
Rights and permissions
About this article
Cite this article
Chiang, K.C.H., Wachtel, G.J. & Zhou, X. Corporate Social Responsibility and Growth Opportunity: The Case of Real Estate Investment Trusts. J Bus Ethics 155, 463–478 (2019). https://doi.org/10.1007/s10551-017-3535-1
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-017-3535-1