Skip to main content
SpringerLink
Log in

Corporate Social Responsibility and Growth Opportunity: The Case of Real Estate Investment Trusts

  • Original Paper
  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. http://www.epa.gov/greenbuilding/pubs/whybuild.htm.

  2. 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.

  3. http://www.reit.com/news/videos/development-standards-changing-sustainability-executive-says.

  4. Bénabou and Tirole (2010) provide an analysis of individual social responsibility versus corporate social responsibility.

  5. 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.

  6. Mortgage REITs are excluded due to their fixed-income nature.

  7. Limited dependent variable regression is quite standard in econometrics. Details about this method can be found in Greene (1997).

  8. We do not report the table of correlation coefficients in the interest of brevity; the table is available upon request.

  9. 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.

    Google Scholar 

  • Aivazian, V. A., Ge, Y., & Qiu, J. (2005). The impact of leverage on firm investment: Canadian evidence. Journal of Corporate Finance, 11, 277–291.

    Article  Google Scholar 

  • Asongu, J. J. (2007). Innovation as an argument for corporate social responsibility. Journal of Business and Public Policy, 1, 1–21.

    Google Scholar 

  • Baker, M., & Wurgler, J. (2002). Marketing timing and capital structure. Journal of Finance, 57, 1–32.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71–86.

    Article  Google Scholar 

  • Barnett, M. L. (2007). Stakeholder influence capacity and the variability of financial returns to corporate social responsibility. Academy of Management Review, 32, 794–816.

    Article  Google Scholar 

  • Belkaoui, A., & Karpik, P. G. (1989). Determinants of the corporate decision to disclose social information. Accounting, Auditing and Accountability Journal, 2, 36–51.

    Article  Google Scholar 

  • Bénabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. Economica, 77, 1–19.

    Article  Google Scholar 

  • Bernstein, H. (2009). Greening of Corporate America. New York: McGraw Hill Construction.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Cannon, S., & Vogt, S. (1995). REITs and their management: An analysis of organizational structure. Journal of Real Estate Research, 10, 297–317.

    Google Scholar 

  • Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4, 497–505.

    Article  Google Scholar 

  • Case, B., Colwell, P. F., Leishman, C., & Watkins, C. (2006). Real Estate Economics, 34, 77–107.

    Article  Google Scholar 

  • Chan, M. C., Watson, J., & Woodliff, D. (2014). Corporate governance quality and CSR disclosure. Journal of Business Ethics, 125, 59–73.

    Article  Google Scholar 

  • Cormier, D., Gordon, I. M., & Magnan, M. (2004). Corporate environmental disclosure: Contrasting management’s perceptions with reality. Journal of Business Ethics, 49, 143–165.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Cragg, J. G., & Malkiel, B. G. (1982). Expectations and the structure of share prices. Chicago, IL: University of Chicago Press.

    Book  Google Scholar 

  • Cullen, L., & Christopher, T. (2002). Governance disclosures and firm characteristics of listed Australian mining companies. International Journal of Business Studies, 10, 37–58.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • Deephouse, D. L. (1996). Does isomorphism legitimate? Academy of Management Journal, 39, 1024–1039.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • Downs, D. H., & Güner, N. Z. (2006). On the quality of FFO forecasts. Journal of Real Estate Research, 28, 257–274.

    Google Scholar 

  • Eichholtz, P., Kok, N., & Quigley, J. M. (2010). Doing well by doing good? Green office buildings. American Economic Review, 100, 2492–2509.

    Article  Google Scholar 

  • Ettlie, J. E., & Rubenstein, A. H. (1987). Firm size and product innovation. Journal of Product Innovation Management, 4(2), 89–108.

    Article  Google Scholar 

  • Falkenbach, H., Lindholm, A., & Schleich, H. (2010). Environmental sustainability: Drivers for the real estate investor. Journal of Real Estate Literature, 18, 203–223.

    Google Scholar 

  • Flammer, C. (2013). Corporate social responsibility and shareholder reaction: The environmental awareness of investors. Academy of Management Journal, 56, 758–781.

    Article  Google Scholar 

  • Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder theory and the corporate objective revisited. Organization Science, 15, 364–369.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • Grayson, D., & Hodges, A. (2004). Corporate social opportunity! 7 steps to make corporate social responsibility work for your business. Sheffield: Greenleaf.

    Google Scholar 

  • Greene, W. H. (1997). Econometric analysis (3rd ed.). Upper Saddle River, NJ: Prentice Hall.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • Hackston, D., & Milne, M. J. (1996). Some determinants of social and environmental disclosures in New Zealand companies. Accounting, Auditing & Accountability Journal, 9, 77–108.

    Article  Google Scholar 

  • Han, B. (2006). Insider ownership and firm value: Evidence from real estate investment trusts. Journal of Real Estate Finance and Economics, 32, 471–493.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Howe, J., & Shilling, J. (1990). REIT advisor performance. AREUEA Journal, 18, 479–499.

    Google Scholar 

  • Hsieh, C., & Sirmans, C. F. (1991). REITs as captive-financing affiliates: Impact on financial performance. Journal of Real Estate Research, 6, 179–189.

    Google Scholar 

  • Husted, B. W. (2005). Risk management, real options, corporate social responsibility. Journal of Business Ethics, 60, 175–183.

    Article  Google Scholar 

  • Jarrell, G. A., & Poulsen, A. B. (1988). Dual-class recapitalizations as antitakeover mechanisms. Journal of Financial Economics, 20, 129–152.

    Article  Google Scholar 

  • Jawahar, J. M., & McLaughlin, G. L. (2001). Toward a descriptive stakeholder theory: An organizational life cycle approach. Academy of Management Review, 26, 397–414.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Jo, H., & Harjoto, M. A. (2011). Corporate governance and firm value: The impact of corporate social responsibility. Journal of Business Ethics, 103, 351–383.

    Article  Google Scholar 

  • Jo, H., & Na, H. (2012). Does CSR reduce firm risk? Evidence from controversial industry sectors. Journal of Business Ethics, 110, 441–456.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Jung, K., Kim, Y., & Stulz, R. (1996). Timing, investment opportunities, managerial discretion, and the security issue decision. Journal of Financial Economics, 42, 159–181.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Kotler, P., & Lee, N. (2005). Corporate social responsibility: Doing the most good for your company and your cause. Hoboken, NJ: Wiley.

    Google Scholar 

  • Lang, L., Ofek, E., & Stulz, R. M. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40, 3–29.

    Article  Google Scholar 

  • Line, M., Hawley, H., & Krut, R. (2002). Development in global environmental and social reporting. Corporate Environmental Strategy, 9, 69–78.

    Article  Google Scholar 

  • Ling, D. C., & Archer, W. R. (2010). Real estate principles: A value approach. New York, NY: McGraw-Hill Irwin.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • Loughran, T., & McDonald, B. (2011). When is a liability not a liability? Textual analysis, dictionaries, and 10-Ks. Journal of Finance, 66, 35–65.

    Article  Google Scholar 

  • Lutzkendorf, T., & Lorenz, D. (2007). Integrating sustainability into property risk assessments for market transformation. Building Research & Information, 35, 644–661.

    Article  Google Scholar 

  • Mason, C., & Simmons, J. (2014). Embedding corporate social responsibility in corporate governance: A stakeholder systems approach. Journal of Business Ethics, 119, 77–86.

    Article  Google Scholar 

  • McConnell, J. J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27, 595–612.

    Article  Google Scholar 

  • McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26, 117–127.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • Mishra, S., & Modi, S. B. (2013). Positive and negative corporate social responsibility, financial leverage, and idiosyncratic risk. Journal of Business Ethics, 117, 431–448.

    Article  Google Scholar 

  • Morck, R. K., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.

    Article  Google Scholar 

  • Neu, D., Warsame, H., & Pedwell, K. (1998). Managing public impressions: Environmental disclosures in annual reports. Accounting, Organizations and Society, 23, 265–282.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Partch, M. (1987). The creation of a class of limited voting common stock and shareholder wealth. Journal of Financial Economics, 18, 313–339.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Perrow, C. (1970). Organizational analysis: A sociological view. Belmont, CA: Tivastock.

    Google Scholar 

  • Pivo, G. (2007). Exploring responsible property investing: A survey of American executives. Corporate Social Responsibility and Environmental Management, 15, 235–248.

    Article  Google Scholar 

  • Pivo, G., & Fisher, J. D. (2010). Income, value, and returns in socially responsible office properties. Journal of Real Estate Research, 32, 243–270.

    Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Google Scholar 

  • Reverte, C. (2009). Determinants of corporate social responsibility disclosure ratings by Spanish listed firms. Journal of Business Ethics, 88, 351–366.

    Article  Google Scholar 

  • Roberts, R. W. (1992). Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting, Organizations and Society, 17(6), 595–612.

    Article  Google Scholar 

  • Rogers, J. L., Van Buskirk, A., & Zechman, S. L. C. (2011). Disclosure tone and shareholder litigation. Accounting Review, 86, 2155–2183.

    Article  Google Scholar 

  • 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.

    Google Scholar 

  • Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29, 569–592.

    Article  Google Scholar 

  • Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52, 737–783.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Stulz, R. M. (1988). Managerial control of voting rights: Financing policies and the market for corporate control. Journal of Financial Economics, 20, 25–54.

    Article  Google Scholar 

  • Tetlock, P. C., Saar-Tsechansky, M., & Macskassy, S. (2008). More than words: Quantifying language to measure firms’ fundamentals. Journal of Finance, 63, 1437–1467.

    Article  Google Scholar 

  • Turban, D. B., & Greening, D. W. (1997). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40, 658–672.

    Google Scholar 

  • 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.

    Google Scholar 

  • Valentine, S., & Fleischman, G. (2008a). Ethics programs, perceived corporate social responsibility and job satisfaction. Journal of Business Ethics, 77, 159–172.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Wachter, S. M., & Wong, G. (2008). What is a tree worth? Green-city strategies, signaling and house prices. Real Estate Economics, 36, 213–239.

    Article  Google Scholar 

  • Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Englewood Cliffs, NJ: Prentice-Hall.

    Google Scholar 

  • Wei, P., Hsieh, C., & Sirmans, C. F. (1995). Captive financing arrangements and information asymmetry: The case of REITs. Real Estate Economics, 23, 385–394.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • You, H., & Zhang, X. (2009). Financial reporting complexity and investor under reaction to 10-K information. Review of Accounting Studies, 14, 559–586.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Business Administration, University of Vermont, 315 Kalkin Hall, 55 Colchester Avenue, Burlington, VT, 05405-0157, USA

    Kevin C. H. Chiang & Gregory J. Wachtel

  2. School of Management, University of Alaska Fairbanks, Fairbanks, AK, 99775, USA

    Xiyu Zhou

Authors
  1. Kevin C. H. Chiang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Gregory J. Wachtel
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Xiyu Zhou
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Kevin C. H. Chiang.

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

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

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

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-017-3535-1

Keywords

Search

Navigation