Thomas Lindner

Professor of International Management

New paper on responsible shareholders

Journal of Management Studies has just published my most recent paper with Arjen Slangen, Aleksi Eerola, and Riccardo Valboni:

This is a short summary of the paper: Is socially-responsible shareholders’ sense of responsibility universal? One might think so, but this is actually not the case, according to this new study of firms’ decisions on tax-motivated international relocations of headquarters (HQs). Since such relocations deprive the domestic government of taxes and often also harm domestic employment, one may expect them to occur less among firms that are more strongly controlled by large shareholders (‘blockholders’) with a sense of social responsibility, such as public pension funds and family owners. Although our logit analyses of US firms over the period 1998-2017 support this expectation, we also find that socially-responsible blockholders are much more likely to prevent tax-motivated HQ relocations when these blockholders are domestic rather than foreign ones. This finding suggests that socially-responsible shareholders care more about the welfare of other stakeholders when these stakeholders have the same nationality as them rather than a different nationality. Instead of being universal, socially-responsible shareholders’ sense of responsibility is thus stronger towards compatriots and, hence, subject to affinity bias. Moreover, our study shows that CEOs critically contribute to how strongly this bias expresses itself in firms’ social responsibility decisions. Specifically, we find that socially-responsible domestic blockholders are more effective at preventing tax-motivated HQ relocations in firms with a domestic CEO than in firms with a foreign CEO. Affinity bias among socially-responsible blockholders thus has a particularly large impact in firms whose CEO is a compatriot of these blockholders.