Does investor communication improve corporate social responsibility? A machine learning-based textual analysis

In this study, we take a machine learning-based approach to measure institutional investor attention to corporate social responsibility (CSR) issues when communicating with firms during site visits. We find that institutional investors can effectively enhance CSR performance through CSR-related communication. This effect remains robust to various checks and is more pronounced for non-state-owned enterprises and firms with lower levels of institutional ownership and in periods following the issuance of Green Investment Guidelines. We also identify information asymmetry and financing constraints as the two mechanisms underlying this effect. Overall, our findings highlight the importance of private interactions between management and institutional investors in promoting CSR.