1

Corporate Governance: An International Review, 2014, ••(••): ••–••

The Influence of Family Ownership on

Corporate Social Responsibility: An
International Analysis of Publicly
Listed Companies
William Rees, and Tatiana Rodionova*

Manuscript Type: Empirical

Research Question/Issue: We investigate the impact of family equity holdings on three indicators of corporate social
responsibility: environmental, social, and governance (ESG) rankings. We further evaluate how firm governance mediates
the effect of family ownership on environmental and social improvements and how national governance systems influence
the response of family holdings to ESG.
Research Findings/Insights: Based on a sample of 23,902 firm-year observations drawn from 2002 to 2012 covering 46
countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated
with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and
social rankings, but family ownership retains a significant negative association. These results are strong and consistent
across liberal market economies (LME), whereas coordinated market economies (CME) exhibit generally weaker results and
considerable diversity. Japan stands out as different from the other countries examined in depth.
Theoretical/Academic Implications: Our results are consistent with agency relationships driving decisions concerning ESG
commitment in LMEs. They also emphasize the role of institutional differences given the weak and variable association
between ownership and ESG in CMEs. We show that families may be able to influence decisions, possibly through
participation in management, despite normally effective governance constraints. As the impact of ownership and gover-
nance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the
context of the economic environment.
Practitioner/Policy Implications: Our results offer insights to regulators and policy makers who intend to improve ESG
performance. The results suggest that encouraging diversified ownership is particularly important in LMEs, that improve-
ments in governance may benefit social and environmental performance where equity is closely held by institutions, but that
governance may be less effective in the presence of family ownership.

Keywords: Corporate Governance, Corporate Social Responsibility, Environment, Family Firms, Closely Held Equity

INTRODUCTION nance performance is gaining prominence (Aguilera, Rupp,

Williams, & Ganapathi, 2007; Campbell, 2007). Prior work

W e examine the impact of closely held equity, and in

particular family held equity, on corporate social
responsibility as reflected in publicly available scores of the
environmental, social and governance (ESG) performance of
firms. These issues have been receiving increased attention
from regulators, investors, and businesses, and the question
of what drives or hinders environmental, social, and gover-
*Address for correspondence: Tatiana Rodionova, The University of Edinburgh Busi-
ness School, 29 Buccleuch Place, Edinburgh EH8 9JS, UK. Tel.: 131-6503789; E-mail:
Tatiana.Rodionova@ed.ac.uk.
has addressed this question mostly from an institutional
(Aguilera & Jackson, 2003; Campbell, 2007; Ioannou &
Serafeim, 2012; Kang & Moon, 2012; McWilliams & Siegel,
2001) or a resource perspective (Arora & Dharwadkar, 2011).
However, much of the influence on ESG investment comes
from the shareholders of the firm, particularly influential
blockholders who monitor management (Barnea & Rubin,
2010; Shleifer & Vishny, 1986). While there is some evidence
of the negative impact of blockholdings on corporate social
responsibility, little attention has been given specifically to
the influence of family equity holdings (Barnea & Rubin,

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12086
2 CORPORATE GOVERNANCE
2010; Mackenzie, Rees, & Rodionova, 2013; Rees &
Rodionova, 2013). This is potentially important as family
owners often retain control of the company management,
thereby increasing their influence on decision making
(Faccio & Lang, 2002; La Porta, Lopez-de-Silanes, & Shleifer,
1999; Le Breton-Miller & Miller, 2006; Silva & Majluf, 2008).
This paper aims to fill a gap in the literature by directly
investigating how family ownership affects the ESG prac-
tices of firms. We expect families to differ from other closely
held blockholders as they have their personal wealth
invested in the firm and have both financial and socio-
emotional incentives with regard to the firm’s performance
and viability (Kappes & Schmid, 2013). Further, we are inter-
ested to see whether and how corporate governance and the
national economic system influence the relationship
between family ownership and environmental and social
performance. Corporate governance aims to balance inter-
ests of different shareholders and stakeholders of the firm
and has been shown to influence corporate social responsi-
bility (Aguilera, Williams, Conley, & Rupp, 2006; Jo &
Harjoto, 2011). It can therefore affect the power that family
owners have over decision making in the firm, and may alter
the impact of family equity on environmental and social
investments. We also investigate the impact of differences in
the national economic systems, which have been shown to
influence corporate behavior with regard to social, environ-
mental, and ethical issues (Campbell, 2007; Kang & Moon,
2012). Whilst the national governance systems may influence
the baseline ESG performance in an economy, we also inves-
tigate whether these differences influence the impact of
equity ownership on ESG.
Our sample consists of 23,902 firm-years drawn from 2002
to 2012 for 46 countries, mainly representing developed
economies. The initial results are based on conventional
regression techniques where the social, environmental, or
governance performance is modeled against the test variable
identifying the closely held equity and a set of control vari-
ables accounting for year, industry, country, leverage, prof-
itability, market-to-book, and capitalization. We find closely
held equity, and even more so family shareholdings, to be
associated with lower ESG levels.
However, simply demonstrating an association between
blockholdings and ESG scores does not show that the own-
ership structure causes the low ESG levels. In the case of
family ownership reverse causality would imply that low
levels of ESG attract family investors (or would encourage
them to retain their family ownership), while high ESG
levels prompt family owners to reduce their positions in the
company. The latter implies that high ESG expenditures
(expressed in high ESG ratings) could not be countered by
direct action from powerful entrenched owners. We argue
that in the case of influential and entrenched family owner-
ship, this is unlikely. We also address the causality issue
empirically by using quantile regressions to investigate the
relationship between ownership and ESG levels for cases
where the ESG level is high. Here we obtain a stronger
negative impact of family ownership on ESG rankings for
firms with relatively high ESG scores. This is inconsistent
with the argument that low ESG levels attract family own-
ership. Our results from the regression models are con-
firmed when we use a propensity score matching (PSM)
Volume •• Number •• •• 2014
approach that attempts to mitigate the endogeneity difficulty
inherent in conventional regression modeling (Rosenbaum
& Rubin, 1983).
This study offers several contributions. Firstly, we add to
the literature that seeks to understand the relationship
between ownership, governance, and social responsibility.
In particular, investor influence on corporate social respon-
sibility is a growing but still under-researched area, with
most attention hitherto paid to institutional ownership (Cox,
Brammer, & Millington, 2004; Sjöström, 2008). Our analysis
highlights the role of closely held ownership, and in particu-
lar family ownership, as an important influence on ESG
investments across an internationally diverse sample of
firms.
Further, we contribute to the literatures on family gover-
nance and the interaction between internal governance,
national governance, and influential monitoring owners.
Emerging literature suggests that there is an increasing
trend for corporate governance to reflect the interests of
stakeholders rather than solely shareholders of the firm (Jo &
Harjoto, 2012; Ricart, Rodríguez, & Sánchez, 2005; Spitzeck,
2009). Here our findings highlight that family owners differ
from other blockholders. While high levels of internal gov-
ernance counterbalance the influence of the closely held
equity on environmental and social investment, family
owners are able to circumvent governance and preserve
their influence regardless of the governance system. We also
show that the impact of ownership on ESG varies depending
on economic and institutional environments. In particular,
the negative impact of ownership on ESG is concentrated in
LMEs. These findings are consistent with recent arguments
suggesting that more attention should be paid not to a par-
ticular governance mechanism per se but to its relationship
with other internal governance provisions and the national
governance system (Aguilera et al., 2006; Yoshikawa, Zhu, &
Wang, 2014).
From the theoretical perspective, our study enriches
understanding of the motivations of family ownership.
Family owners are thought to be extremely long term in
outlook and to be particularly concerned about the relation-
ships with stakeholders to ensure firm survival and well-
being (Le Breton-Miller & Miller, 2006, 2009; Yoshikawa et
al., 2014). Our results, however, indicate that, when it comes
to investments that foster social good but do not guarantee
financial returns, families tend to act as financial wealth
maximizers and tend to hinder such expenditures.
PRIOR RESEARCH AND HYPOTHESES
Closely Held Ownership and ESG Performance
Improving environmental, social, and governance perfor-
mance has become a major challenge for the corporations.
Some ESG developments may advance operational perfor-
mance (Berry & Rondinelli, 1998; Edmans, 2011), and aca-
demic evidence suggests that excellent ESG performance
can be a source of competitive advantage (Aguilera et al.,
2006; McWilliams & Siegel, 2001; Porter & van der Linde,
1995). For example, ESG projects may bring strategic ben-
efits by improving relationships with stakeholders, includ-
ing consumers, suppliers, and employees (Becker-Olsen,
© 2014 John Wiley & Sons Ltd
FAMILIES AND CSR
Cudmore, & Hill, 2006; Bénabou & Tirole, 2010; Brekke &
Nyborg, 2008; McWilliams & Siegel, 2001; Siegel & Vitaliano,
2007; Turban & Greening, 1997). Such developments have
been shown to increase the market value of the firm (Jo &
Harjoto, 2011, 2012). However, ESG projects require sub-
stantial investment, for example where a company aims to
reduce toxic pollution or restrain the use of pesticides in the
supply chain. Chatterji and Toffel (2010) argue that compa-
nies are particularly likely to improve their environmental
practices where they offer “low-hanging fruit” opportuni-
ties. However, many ESG developments may be negative
net present value (NPV) investments, for example with-
drawal from drilling in an ecologically sensitive area, or
price restraint by pharmaceutical firms. Agency theory sug-
gests that managers may overinvest in such projects to serve
their personal interests, including a “warm-glow effect” and
favorable professional reputation (Barnea & Rubin, 2010;
Bénabou & Tirole, 2010). Consequently, whether or not the
firm invests in ESG improvements becomes a source of the
conflict of interest between managers, shareholders, and
broader stakeholders of the firm (Cespa & Cestone, 2007;
Orlitzky, Schmidt, & Rynes, 2003).
Academic evidence has argued that blockholders have the
incentives and ability to monitor management to ensure that
their interests are satisfied (Burkart, Gromb, & Panunzi,
1997; Demsetz & Lehn, 1985; Jensen & Meckling, 1976;
Shleifer & Vishny, 1986). These large owners bear the cost of
investment in ESG projects (Cox et al., 2004) and have the
influence to constrain ESG initiatives. Prior literature offers
some, albeit inconclusive, evidence of this negative relation-
ship (Barnea & Rubin, 2010; Ioannou & Serafeim, 2012; Rees
& Rodionova, 2013). Our main aim is to isolate the influence
of family holdings specifically and compare it to the influ-
ence of other closely held equity, but we first revisit the
question of the relationship between all closely held stock
and corporate ESG levels.
Hypothesis 1. There is a negative relationship between closely
held equity and ESG scores.
Families and ESG Performance
Family ownership is thought to be the most common own-
ership structure (La Porta et al., 1999). Faccio and Lang
(2002) find that 44.29 percent of firms in 13 Western Euro-
pean countries are family firms while one third of public US
firms can be regarded as controlled by families (Anderson &
Reeb, 2003). Families and business groups are also seen to
dominate corporate control in emerging markets (Silva &
Majluf, 2008). Family owners are unique as they have very
long investment horizons, they are undiversified and often
occupy senior management positions (Anderson & Reeb,
2003). They also have a complex nexus of economic and
personal motives with regard to the firm (Andres, 2008).
We argue that family block ownership will have a stronger
negative impact on environmental, social, and governance
performance of firms than closely held equity in general.
Our main rationale is that, as families have large and long-
term ownership stakes in the firm, they will be particularly
opposed to excessive ESG investment because it may not
bring personal benefits. Firstly, this is consistent with the
© 2014 John Wiley & Sons Ltd
3
agency theory suggesting that large powerful owners
channel the firm’s activity towards their benefits (Shleifer &
Vishny, 1986). For example, families may prioritize stable
cash flow in order to sustain a privileged lifestyle and ensure
high dividend payments (Barth, Gulbrandsen, & Schone,
2005; Kappes & Schmid, 2013). Further, DeAngelo and
DeAngelo (2000) find that family preferences for special
dividends may influence their investment plans.
Secondly, families may oppose ESG investments as being
value destroying (Barnea & Rubin, 2010; Rees & Rodionova,
2013). For example, the entrenchment view suggests that
activities related to corporate social responsibility may be
used by the entrenched management to advance their
agenda by appealing to non-financial stakeholders (Cespa &
Cestone, 2007). Given their large equity positions and finan-
cial interest in the firm, family owners may then be expected
to constrain these developments.
Thirdly, family owners may consider themselves to be
better monitors and to have better knowledge of the busi-
ness. Indeed, their long historical presence in the firm and
personal attachment can give them unique knowledge of the
business and can make them well placed to monitor decision
making (Anderson & Reeb, 2003; Le Breton-Miller & Miller,
2006; Sraer & Thesmar, 2007). In order to keep control and
ensure family participation in management, family owners
may forgo governance improvements (Andres, 2008; Hillier
& McColgan, 2009).
Finally, although we previously argued that closely held
equity in general will be associated with lower ESG perfor-
mance, we argue that this effect will be less strong than in
the case of families. Indeed, some blockholders may have
motivations to resist ESG developments to a lesser extent.
For example, the state has to address the issues of the quality
of life and environmental concerns and may therefore not
entirely oppose the efforts of the corporations regarding
ESG improvements (Dam & Scholtens, 2012; Rees &
Rodionova, 2013). More diversified equity holders, such as
investment institutions, rely on multiple markets and may
be affected by the economic consequences of political and
social instability or environmental damage caused by a weak
ESG position (Gjessing & Syse, 2007). Further, they have to
preserve their reputation to sustain competition for funds,
and exhibiting higher ESG involvement is an important way
to improve corporate image (Godfrey, Merrill, & Hansen,
2009). Finally, pension funds are facing increasing pressure
from their beneficiaries for socially responsible investment
(Cumming & Johan, 2007). Conversely, family owners typi-
cally invest their wealth in the firm (Anderson & Reeb, 2003).
Consequently, they do not have the reputational pressure for
social and environmental responsibility from the beneficia-
ries.
Based on the evidence above, we argue that, as families
have private wealth invested in the firm and have long-term
commitment to this investment, they will be guided by per-
sonal benefits and will have less motivation to take ESG
issues into consideration. We then predict the following rela-
tive relationships between ownership and ESG:
Hypothesis 2. The negative relationship between closely held
ownership and ESG scores is stronger for family shareholdings
than for those of other blockholders.
Volume •• Number •• •• 2014
4 CORPORATE GOVERNANCE
The Mediating Impact of Internal Governance
Agency theory suggests that internal governance aims to
align interests of managers and investors, and to ensure that
corporate decisions are made to offer shareholders the
return on their investment (Gillan & Starks, 2007). Such a
view implies that management would not support excessive
ESG (Barnea & Rubin, 2010). More recently, it has been sug-
gested that good governance serves (or should serve) the
interests of various stakeholders (Aguilera et al., 2007;
Spitzeck, 2009). Strong governance would then prevent cor-
porations from having a detrimental impact on their stake-
holders, for example via lost pensions or social instability,
and improve their corporate social responsibility. Jo and
Harjoto (2011, 2012) tested the relationship between corpo-
rate governance and corporate social responsibility and
found support for the stakeholder interpretation of gover-
nance. Their rationale suggested that engaging in corporate
social responsibility ensures favorable relationships
between the company and its stakeholders and helps to
avoid costly conflicts (Jo & Harjoto, 2012).
When a company has powerful blockholdings, these
owners are likely to resist excessive ESG, viewing it as a
costly investment with uncertain benefits to the company
(Barnea & Rubin, 2010). Strong governance, however, is
argued to prevent large blockholders from imposing their
agenda and ensures that the power of different investors in
the company is balanced (Shleifer & Vishny, 1986). Many
investment funds are increasingly viewing corporate social
responsibility as a fiduciary duty towards their trustees
(Aguilera et al., 2007). Other diversified investors may view
environmental and social programs as an important risk
management tool or they may favor reputational benefits of
enhanced environmental and social performance (Gjessing
& Syse, 2007). Consequently, if the governance system is
strong, managers have more opportunities to take the inter-
ests of other financial and non-financial stakeholders into
consideration, and the influence of large owners with closely
held equity decreases:
Hypothesis 3. Higher levels of internal governance reduce the
negative impact of closely held equity on environmental and
social scores.
However, we predict that the impact of governance will be
weaker for family owners than for other blockholders.
Indeed, personal relationship of family owners with the firm
and undiversified ownership gives them a strong incentive
to remain in control of their firms (Burkart et al., 2003;
Hillier & McColgan, 2009; Rees & Rodionova, 2013; Shleifer
& Vishny, 1986). Family owners are argued to often occupy
diverse positions in the firm and to be involved in manage-
ment (Arregle, Hitt, Sirmon, & Very, 2007; Birley, 2001). They
are also shown to use informal control mechanisms, for
example recruiting and promoting employees whose values
are closely aligned with their own (Arregle et al., 2007;
Coffee & Scase, 1985). This reduces the manager-owner
agency conflict but increases the power of family ownership
to directly influence decision making and weakens the role
of corporate governance. Consistent with this argument,
Yoshikawa et al. (2014) show that in family-owned firms the
role of outside directors is primarily related to providing
Volume •• Number •• •• 2014
resources to managers rather than performing monitoring
activities. Given families’ capture of control, we predict that
their influence on ESG investment will remain strong
regardless of the governance system:
Hypothesis 4. Higher levels of internal governance do not
reduce the negative impact of family equity on environmental
and social scores.
Institutional Differences and Family Ownership
Campbell (2007) has shown that national institutions influ-
ence the propensity of firms to behave in a socially respon-
sible way. Country-wide governance systems also define the
way that firms communicate with various stakeholders and
take their interests into consideration (Aguilera & Jackson,
2003). One categorization of institutional systems is the
liberal market economy (LME) and coordinated market
economy (CME) dichotomy proposed by Hall and Soskice
(2001). Although this characterization includes many dimen-
sions, LMEs are crucially seen as focusing on the interests of
investors and managers as key stakeholders (Kang & Moon,
2012). In these systems the stock market is the main source
of capital and therefore there is greater pressure for busi-
nesses to deliver financial returns to the equity providers.
Corporate managers are encouraged to respond to the
demands of non-financial stakeholders if these demands are
consistent with long-term shareholder value creation
(Jackson & Apostolakou, 2010). LMEs are argued to have
higher levels of investor protection, and other stakeholders
usually have to advance their agendas via market mecha-
nisms such as stakeholder activism. Consistent with this
setting, many of the environmental, social, and governance
practices are voluntary, and the strategic use of ESG prac-
tices and their implications for investors and financial per-
formance are emphasized (Kang & Moon, 2012). Given the
voluntary nature of ESG and the focus on the financially
beneficial investments, families in LMEs are likely to have
more incentive and power to restrain ESG expenditures
where the profits are uncertain. Further, management in
LMEs has relative autonomy with regard to decision making
and may tend to overinvest in ESG projects for a personal
“warm-glow” effect or with the strategic aim of balancing
interests of other stakeholders (Barnea & Rubin, 2010;
Jackson & Apostolakou, 2010; Jo & Harjoto, 2011). However,
as families often have influential executive representation,
they are likely to have the power to obstruct these ESG
initiatives in LMEs.
In the case of CMEs more emphasis is placed on the
welfare of the society in general so firms have to respond to
various stakeholders (Judge, Gaur, & Muller-Kahle, 2010; La
Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1997). In this
governance system, firms have to rely more on networks and
cooperation, for example with labor unions (Midttun,
Gautesen, & Gjølberg; 2006). Campbell (2007) argues that
firms are more likely to adopt socially responsible practices
if they are involved in the institutionalized dialogue with
employees, unions, community, investors, and other stake-
holders of the firm. Companies in CMEs, therefore, face
significant relational pressure to engage in environmental
and social practices (Aguilera et al., 2007; Young & Marais,
© 2014 John Wiley & Sons Ltd
FAMILIES AND CSR
2012). For example, powerful labor unions may prompt
companies to act on issues that are related to employee
health and safety or their communities (Ioannou & Serafeim,
2012). Consequently, family owners have to take these envi-
ronmental and social demands into account. Further, many
ESG issues in CMEs are embedded in business practice by
regulation, as opposed to the voluntary policies and pro-
grams in LMEs (Kang & Moon, 2012). Families may then
have less scope to restrain ESG expenditures. Based on the
differences in the stakeholder power in these two institu-
tional systems and the way national governance can con-
strain family owners’ influence, we predict the following
relationship:
Hypothesis 5. The negative influence of family ownership on
ESG is weaker in coordinated market economies than in liberal
market economies.
There is some consistency across LMEs in that, for
example, they tend to have large stock markets, given their
GDP, high levels of investor protection, and a common law
basis for their legal system; there is more heterogeneity
within the CME classification. Indeed many commentators
have attempted to identify sub-groups such as Jackson and
Apostolakou’s (2010) Central, Nordic, and Latin classifica-
tion of European LMEs. Whilst we recognize this diversity
within the CME category, we will use it as an initial classi-
fication to segment our sample into two clearly different
sub-samples. We also acknowledge that this will not
produce homogeneous groups and we will therefore subject
our results to a sensitivity analysis based on an analysis of
individual countries.
RESEARCH METHOD
OLS Regression Models
The initial results are based on a pooled time-series and
cross-sectional sample of international firms, based on Jo
and Harjoto (2012), where we control for sample selection
bias and pool the sample across countries, industries, and
years. We differ from Jo and Harjoto (2012) in that we control
for countries, unnecessary in their single economy setting,
for years and for the firm-level clustering of error terms. If
we omit year dummies, we find statistically significant rela-
tionships driven by sample-wide time trends that can
appear to suggest firm-specific causal relationships where
none exist. If we omit controls for the firm-specific clustering
of error terms, we find that standard errors are inflated and
our t-statistics are approximately twice those estimated
when using clustering. Thus our initial models are:
ESG Scoreit = β0 + β1Closelyit + β 2 Family it + β 3 Leverageit
+ β 4 Profitability it + β 5 MTBit + β6 Log ( MV )it
+ β7 Industryit + β8 Countryit + β9 Millsit + Σyl Yit + eit
where ESG Score is the firm-specific assessment provided by
ASSET41 for environmental, social, or governance practices,
Closely2 is the percentage of equity reported by Worldscope
as being closely held by different blockholders, including
© 2014 John Wiley & Sons Ltd
5
employees and families, pension funds and financial
institutions, individuals, and other corporations, Family3 is
the percentage of equity held by family or employee
shareholders as provided by Datastream, Leverage,
Profitability, MTB, and Log(MV) are the percentiles of
long-term debt over equity, net income over book value of
equity, market value of equity over book value of equity and
the log of the US$ value of market capitalization,
respectively. We express the leverage, profitability, and MTB
ratios as a percentile of the sample distribution to scale them
in a similar way to the dependent variables that are all
calculated on a scale from 0 to 100. Mills is the inverse Mills
ratio included to control for sample selection bias, Industry
and Country are the relative means for the dependent
variables, and Y are year dummies. We also run the model
with country and industry dummies, replacing the mean of
the variable for each category and find that the results are not
significantly changed. The version of the model using
country and industry dummies is used for the estimation of
the inverse Mills ratio. The standard errors are clustered for
firm effects.
Endogeneity and OLS Models
The model specified above is threatened by potential
endogeneity. We have incorporated the conventional control
for sample selection bias, which is based on the probability
that a firm included in the ASSET4 universe is also included
in our sample. This requires that both ASSET4 ESG scores
and control variables are available and we model this using
a probit version of the OLS regression with industry and
country scores replaced by dummy variables. Whilst the
inverse Mills ratio is usually statistically significant in our
models, the impact of its inclusion on the significance of the
other variables is modest. This represents a standard method
of controlling for sample selection bias.
More problematic is the potential threat from omitted cor-
related variables. Here we postulate that factors not included
in our model, or not correctly specified in our model, could
impact on both ESG scores and family ownership. A
common approach to dealing with this is to include firm
fixed effects and, if we ignore the issues relating to strict
endogeneity, which requires inter-temporal endogeneity
between the variables in the model, this could provide an
informative set of results. However, for our sample the
inclusion of firm fixed effects cancels all significant relation-
ships between the explanatory variables and the dependent
variable. Running a between-effects model confirms that the
explanatory power of the model is driven almost entirely by
the differences between firms and not differences within
firms. This is not unexpected given the stable nature of the
variables in our model. ESG performance and equity own-
ership change only slowly. Nevertheless, it is worth retain-
ing the panel data approach, as there are many firms in our
sample for which we only have results for some years, and
using a pooled time-series and cross-section allows us to
control for year differences.
There remains the possibility that omitted factors are cor-
related with both our test variable, family-held equity, and
the dependent variables, ESG scores. As we have a control
variable which measures all closely held equity, that factor
Volume •• Number •• •• 2014
6 CORPORATE GOVERNANCE
would have to be related to family ownership and not to
other closely held equity. Even so, it is worth considering
what other factors might have an impact on the model. Com-
mentators on earlier versions of this paper have suggested
that the direction of causality is an issue. Indeed, it is quite
possible that investors might be attracted to or repelled by
ESG performance, and hence ESG performance may drive
closely held ownership. Our results are consistent with
closely held equity being associated with low ESG perfor-
mance. This argument is tenable if investors believe that ESG
projects include at least a proportion of value-decreasing
investments. It may seem less likely for family investors.
They are typically making a decision to stay with, rather than
invest in, a firm. Even here, family investors may be happier
to stay with a firm that does not invest in value-reducing
projects. Therefore we investigate the possibility of reverse
causality.
In order to investigate the direction of causality, Jo and
Harjoto (2012) estimate their model with lagged measures of
their test variables, which in our model would be closely
held, or family held, equity, and then replace the dependent
variable with the test variable and use the lagged measure of
the ESG score as an explanatory variable. They interpret
their results as demonstrating that governance causes corpo-
rate social responsibility and not the reverse. However, in
our study we will find that ESG scores and equity holdings,
and indeed the governance element of ESG and the two
“social” components (i.e., social and environmental), each
appear to predict the others with a significant negative coef-
ficient on the lagged explanatory variable in each case. This
is consistent with mean reverting measures of all three vari-
ables. Consequently, we develop an alternative method of
investigating causality.
Quantile Regressions. Our approach assumes that if we
find a negative relationship between closely held stock and
ESG scores, this could be caused by the stockholders influ-
encing ESG performance or by ESG performance attracting
such stockholders. The second possibility can be reliably
ruled out if we can show that firms with high ESG scores are
also adversely affected by family equity holdings. It is not
clear how, under these circumstances, it can be argued that
the family stockholders have been attracted to make, or
encouraged to retain, an investment by poor ESG perfor-
mance if the ESG is, in fact, good. Conditioning the sample
on the dependent variable would be unreliable but we use
quantile regressions to test the relationship between the
explanatory variables and ESG scores at different quantiles
of the dependent variable. If we find that the response
between family firms and ESG is stronger at low levels of
ESG, that would be consistent with low levels of ESG attract-
ing family ownership. Conversely, if we find a consistent or
a stronger relationship between family ownership and ESG
at higher levels of ESG, that contradicts the reverse causality
argument but is consistent with family ownership impacting
on ESG performance.
Propensity Score Matching. Our previous discussion
acknowledges that omitted correlated variables may remain
a source of endogeneity. We use propensity score matching
(PSM) as a sensitivity test that will help to rule out such
Volume •• Number •• •• 2014
explanations as unlikely. PSM attempts to simulate random
allocation between treated and control cases by matching
treated firms, i.e. those with family equity holdings, against
control firms, i.e. those without such holdings but where the
control and treated firms are equally likely to have had a
family holding. By construction we will expect to find that
both groups will be equally matched with regard to the
variables included in the matching equation. Given that the
control firms are a selection from the population of
untreated firms with explicit matching on a set of variables,
there is no a priori reason to expect that the treatment and
control firms will be unbalanced with regard to any omitted
correlated variable from the OLS regressions. This does not
ensure independence from omitted variables but such con-
tamination is less likely. It also does not prove the direction
of causality – only that treated firms have different “out-
comes” from the control firms. This difference may be
because the outcome has caused the treatment; our use of
quantile regressions is designed to test whether or not this is
the case.
Sample and Descriptive Statistics
Our sample is drawn from the full international universe of
firms for which ASSET4 provides ESG data.4 Over the period
2002–2012 this is a population of 43,692 firm-years of which
25,454 have all available ESG scores. Within this sample
there are 1,552 instances where we are unable to identify all
control variables leaving a final sample of 23,902 cases. These
omitted cases could be correlated with the dependent and
test variable causing endogeneity and, as discussed above,
we control for this by estimating and including an inverse
Mills ratio in our models. Table 1 contains the descriptive
statistics from our sample for which we have available data.
This sample includes 3,893 separate firms with 883 cases
from 2002 rising to 3,450 in 2010 and tailing off to 1,275 in
2012. As social, environmental, and governance scores,
leverage, profitability, and market-to-book are all calculated
to fall between 0 and 100, the means close to 50 are to be
expected. The mean of closely held equity is 24.99 percent
and the mean family shareholding is 3.42 percent. If we
restrict the sample to the 3,759 cases with family holdings,
the value of the ESG variables all show a clear decline, the
control variables are broadly similar, the mean for closely
held equity rises slightly to 35.92 percent and the mean
family holding rises to 22.91 percent. Thus, the firms with
family ownership, which are the focus of our study, have an
average of 23 percent held by the family and these firms have
on average another 13 percent of equity with other closely
held investors.
We also present the mean for (1) Japan and (2) the United
States (these two being the largest country samples and rep-
resenting two very different economic and social models),
(3) other coordinated market economies excluding Japan
and (4) other liberal market economies excluding the US
(country-by-country statistics are presented in the appendi-
ces). Here we see the expected divergence between country
characteristics, with the US recording a high governance
score and relatively low levels of closely held stock, and
Japan recording a high environmental score but low gover-
nance. Further, LMEs show relatively high governance and
© 2014 John Wiley & Sons Ltd
FAMILIES AND CSR 7

TABLE 1
Descriptive Statistics

Social Environment Governance Closely Family Leverage Profitability MTB Log(MV)

All
Mean 50.76 50.53 53.04 24.99 3.42 51.95 51.01 50.45 15.38
Std. Dev 30.79 31.92 30.07 23.58 10.92 28.67 28.43 28.83 1.34
p25 20.99 17.43 24.01 2.98 .00 29.00 27.00 25.00 14.54
p50 50.03 47.67 61.00 18.34 .00 53.00 51.00 51.00 15.31
p75 81.31 84.50 79.43 40.95 .00 76.00 76.00 75.00 16.20
N 23902 23902 23902 23902 23680 23902 23902 23902 23902
If Family > 0
Mean 45.17 43.72 45.82 35.92 22.91 48.87 53.52 53.64 15.05
N 3759 3759 3759 3759 3537 3759 3759 3759 3759
US (7,360) 44.87 40.75 73.63 12.83 1.41 54.72 53.16 57.02 15.78
Japan (3,172) 46.41 63.13 11.99 28.72 1.35 45.63 35.92 37.71 15.33
LME (ex-US, 6,700) 51.30 48.71 62.55 25.54 3.96 49.49 53.21 51.26 14.83
CME (ex-Japan, 5,908) 61.61 59.75 40.16 36.53 6.30 55.21 54.38 48.64 15.54

Descriptive statistics are presented for the full sample, for a sub-sample for which closely held equity is assessed as greater than zero and
a second sub-sample for which family equity holdings are assessed as greater than zero. The Social, Environment, and Governance
variables are the ASSET4 assessment of the firms’ performance on each of those dimensions, Closely and Family are respectively the
Worldscope and Datastream measures of closely held stock in total and those holdings attributable to family or employees. Leverage,
Profitability, and Market-to-book (MTB) are the cross-sample percentiles of each variable where the original ratios are calculated as
long-term debt over long-term debt plus equity, net income over equity, and market value of equity over book value of equity, respectively.
The log of market capitalization (log(MV)) is calculated using US$ values.

CMEs exhibit a high social score, high environment, and
high levels of closely held stock. Family ownership appears
high in LMEs and CMEs but low in both the US and Japan.
In our pooled analysis we control for country differences but
these are obviously important. We therefore also present
individual results for each country for which we have a
sample in excess of 300 firm-years.
Table 2 reports the correlation matrix for the variables
used in our tests. We include product moment correlations
beneath the diagonal and Spearman rank correlations above,
but as most of our variables are constructed so as to rule out
outliers, there is barely any difference between the two sets
of correlations. The ASSET4 social and environmental scores
are highly correlated (.76), but the governance score is rela-
tively modestly correlated with the social score (.31) and the
environmental score (.16). All three scores are negatively
correlated with closely held and family holdings, and the
correlations between the ESG outcome variables and the
control variables are quite varied apart from the stable rela-
tionship between leverage and all three measures of ESG
performance. The differing responses of the ESG scores from
the other control variables and from the test variables
suggest that the social, environmental, and governance
scores are rather different constructs.
RESULTS
Panel Data Tests of Association
Table 3 reports our initial results of the panel data analysis of
the social, environmental, and governance performance of
our sample. In models 1 to 3 we investigate the impact of
closely held stock on ESG scores and find a strong and
significant negative relationship (Model 1: β = −.07, p < .001;
Model 2: β = −.07, p < .001; Model 3: β = −.21, p < .001). In
models 4, 5 and 6 we add the family holding variable to
investigate whether family holdings have an association
with ESG performance beyond that explained by closely
held equity. The slope coefficients on closely held equity are
slightly reduced but remain negative and statistically signifi-
cant (Model 4: β = −.05, p < .001; Model 5: β = −.06, p < .001;
Model 6: β = −.19, p < .001), whilst the additional impact of
family holdings is strongly negative and statistically signifi-
cant in all three models (Model 4: β = −.15, p < .001; Model 5:
β = −.14, p < .001; Model 6: β = −.12, p < .001). It should be
noted that the full relationship between the ESG variables
and family holdings is the sum of the slope coefficients on
both closely held equity, which includes family holdings,
and on the family holding itself. Table 1 shows the mean
percentage of family ownership is 22.91 percent for a sample
restricted to the firms with family ownership. This implies
that firms with family ownership typically have 4.6 points
fewer on their social score (23*(−.05−.15)), 4.6 points fewer
on the environmental score (23*(−.06-.14)), and 7.8 points
fewer on the governance score (23*(−.19−.15)) than firms
with diversified shareholders. This translates to a very
similar impact on the ranking of firms on the three ESG
dimensions, i.e. the typical family holding for firms with
family holdings would cause a decline in a firm’s rank in the
ASSET4 scores of approximately 5–8 percentage points.
In the final two models in Table 3 we examine whether
governance intervenes between the ownership characteris-

© 2014 John Wiley & Sons Ltd Volume •• Number •• •• 2014

8 CORPORATE GOVERNANCE

TABLE 2
Correlation Matrix

Social Environment Governance Closely Family Leverage Profitability MTB Log(MV)

Social 1.00 .75*** .35*** −.12*** −.07*** .12*** .13*** .03*** .41***
Environment .76*** 1.00 .20*** −.09*** −.09*** .10*** .03*** −.06*** .34***
Governance .31*** .16*** 1.00 −.48*** −.12*** .11*** .11*** .14*** .18***
Closely −.08*** −.07*** −.45*** 1.00 .25*** −.10*** −.02*** −.05*** −.11***
Family −.06*** −.08*** −.13*** .28*** 1.00 −.05*** .04*** .05*** −.10***
Leverage .12*** .12*** .11*** −.09*** −.04*** 1.00 −.06*** −.09*** .08***
Profitability .12*** .03*** .11*** .01 .05*** −.06*** 1.00 .55*** .25***
MTB .03*** −.08*** .14*** −.04*** .05*** −.09*** .55*** 1.00 .21***
Log(MV) .41*** .35*** .16*** −.07*** −.06*** .08*** .26*** .21*** 1.00

The correlation matrix presents the product moment (beneath the diagonal) and Spearman (above the diagonal) correlation statistics
between the variables as used in our regression and propensity score matching models. The Social, Environment, and Governance
variables are the ASSET4 assessment of the firms’ performance on each of those dimensions, Closely and Family are respectively the
Worldscope and Datastream measures of closely held stock in total and those holdings attributable to family or employees. Leverage,
Profitability, and Market-to-book (MTB) are the cross-sample percentiles of each variable where the original ratios are calculated as
long-term debt over long-term debt plus equity, net income over equity, and market value of equity over book value of equity, respectively.
The log of market capitalization (log(MV)) is calculated using US$ values.
†p < .10.
*p < .05.
**p < .01.
***p < .001.

tics and the social and environmental performance by
including governance as an explanatory variable. Thus we
hypothesize that ownership may impact on governance
which in turn impacts on social and environmental perfor-
mance, but it is unclear whether ownership will impact on
performance beyond its influence via governance. Family
owners are argued to influence most important strategic
decisions, often by being involved in management, occupy-
ing diverse positions in the firm or using informal control
techniques (Arregle et al., 2007; Birley, 2001; Coffee & Scase,
1985). If family owners are more likely than other closely
held equity holders to be involved in management of the
firm, we expect a stronger relationship between ownership
and social and environmental performance for family
owners, after controlling for governance, than for other
closely held shareholders. In models 7 and 8 we observe a
strong positive relationship between governance and social
and environmental performance (Model 7: β = .28, p < .001;
Model 8: β = .28, p < .001), a now positive relationship
between closely held equity and either social (Model 7:
β = .10, p < .001) or environmental (Model: β = .09, p < .001)
scores, but a continuing strong negative association between
family ownership and both social and environmental perfor-
mance (Model 7: β = −.14, p < .001; Model 8: β = −.14,
p < .001). Although all other results are robust to our sensi-
tivity analyses, in this instance the positive coefficients on
closely held stock in models 7 and 8 are insignificant if we
use an alternative model of concentrated ownership
(Datastream’s assessment of strategic holdings) or decom-
pose the governance variable into five components reported
by ASSET4 (board function, board structure, compensation
policy, shareholder rights, and vision and strategy). This
does not impact on our hypotheses but does suggest that the
potentially interesting switch in sign for closely held equity
may not be robust.
The results reported in Table 3 show a clear negative asso-
ciation between family shareholdings and a firm’s social,
environmental, and governance performance after control-
ling for closely held equity in total, industry, country, and
year differences and firm-specific estimates of leverage,
profitability, market-to-book, and capitalization. These offer
support for our first hypothesis, that closely held equity
reduces ESG performance, our second hypothesis, that
family holdings have a stronger negative impact than
general closely held ownership, our third hypothesis, that
allowing for the influence of governance reduces the direct
impact of closely held stock holdings on social and environ-
mental scores, and our fourth hypothesis, that such mitigat-
ing impact is less strong for the influence of family holdings.
However, such tests cannot demonstrate the direction of
causality nor rule out the possibility of omitted correlated
variables. In the following sections we investigate the impact
of causality and then that of omitted variables.
Testing Causality Using Quantile Regressions
We have argued that it is unlikely that family investors
would be attracted by low ESG performance. Typically,
family investors gradually reduce their investment but even
then it is possible that they could be less likely to do so if the
firm has low ESG. But for those firms with higher than
normal ESG, we cannot argue that low ESG is attracting or
retaining family investors. Whilst testing causality may be an
innovative use of quantile regressions, we are able to esti-
mate the relationship between family ownership and ESG

Volume •• Number •• •• 2014 © 2014 John Wiley & Sons Ltd

 TABLE 3
Tests of Association Between Closely Held and Family Equity and Social, Environmental, and Governance Performance

© 2014 John Wiley & Sons Ltd

FAMILIES AND CSR

Model 1 Model 2 Model3 Model 4 Model 5 Model 6 Model 7 Model 8

DV= Social Environment Governance Social Environment Governance Social Environment

Intercept −145.12*** −143.65*** −68.18*** −142.58*** −140.84*** −66.58*** −146.01*** −167.07***

(30.08) (29.22) (19.32) (29.49) (28.51) (18.87) (31.88) (35.61)
Governance .28*** .28***
(21.73) (22.64)
Closely −.07*** −.07*** −.21*** −.05*** −.06*** −.19*** .10*** .09***
(5.23) (5.19) (19.18) (3.73) (3.88) (16.63) (6.90) (5.97)
Family −.15*** −.14*** −.12*** −.14*** −.14***
(5.23) (4.91) (5.27) (5.13) (5.36)
Leverage .05*** .07*** .04*** .05*** .06*** .04*** .03* .04**
(4.60) (5.60) (5.16) (4.47) (5.44) (5.24) (2.46) (3.24)
Profitability .03*** .03** −.00 .04*** .03** .00 .02* .02
(3.31) (2.95) (.01) (3.44) (3.14) (.54) (2.26) (1.90)
MTB −.05*** −.10*** −.01 −.05*** −.09*** −.01 −.08*** −.11***
(4.25) (7.40) (.98) (3.74) (7.02) (.84) (6.93) (9.23)
Log(MV) 7.80*** 7.44*** 3.59*** 7.64*** 7.30*** 3.49*** 6.99*** 7.08***
(27.45) (26.40) (17.92) (26.97) (25.87) (17.39) (25.77) (26.26)
Industry .61*** .76*** .19*** .60*** .75*** .20*** .62*** .77***
(15.53) (26.27) (6.07) (15.41) (26.01) (6.16) (16.56) (27.67)
Country .88*** .84*** .92*** .90*** .85*** .93*** .88*** 1.07***
(29.98) (27.18) (83.02) (30.61) (27.45) (83.13) (32.54) (36.19)
Mills −7.68*** −6.51*** .80 −8.60*** −7.45*** .01 −8.57*** −3.11**
(6.62) (5.72) (.92) (7.56) (6.81) (.01) (7.91) (3.03)
N 23902 23902 23902 23680 23680 23680 23680 23680
R-sq .363 .400 .647 .368 .404 .651 .423 .453

Volume ••
This table presents the results of OLS regressions of ESG performance for the period 2002 to 2012 where the dependent variable is the social, environmental, and
governance score as assessed by ASSET4 and the test variables are closely held equity, family equity holdings (models 4 to 8 only), and governance (models 7 and 8 only).
Control variables are leverage, profitability, market-to-book and the log of capitalization, industry and country averages of the dependent variable, the inverse Mills ratio
and year dummies (unreported). T-statistics are calculated using company clustered standard errors.
†p < .10.
*p < .05.

Number ••
**p < .01.
***p < .001.
9

•• 2014
10 CORPORATE GOVERNANCE

FIGURE 1
Quantile Analysis of the Impact of Closely Held Equity and Family Equity on Social, Environmental, and
Governance Scores

The horizontal scale represents the quantiles of the dependent variable and the vertical scale the estimated slope coefficient
for each quantile. Figure 1a contains the estimated coefficients for closely held equity and Figure 1b the estimates for family
held stock. The solid line represents social performance, dashed environmental and dash-dot governance. (a) Social,
environmental, and governance response to closely held equity. (b) Social, environmental, and governance response to family
held equity

performance at different percentiles of ESG scores. We esti-
mate the model at each tenth percentile between and includ-
ing the 10th and 90th.
We present the results graphically in Figures 1a and b
(detailed results are available on request). The estimated
coefficients are plotted for both closely held (Figure 1a) and
the incremental effect of family held (Figure 1b) equity on
social, environmental, and governance scores. This repre-
sents re-estimates of models 1–6 reported in Table 3. The
coefficients for social scores are represented by a solid line,
for environmental scores by a dashed line and for gover-
nance scores by a dashed-and-dotted line. The important
result for our analysis is that in Figure 1b there is no signifi-
cant evidence of a declining response to family ownership
for higher levels of the dependent variable. For the social
and environmental scores the response increases from left to
right whereas the decline for governance is minor and sta-
tistically insignificant. It is interesting, but not directly rel-
evant to our hypothesis testing, that in Figure 1a the impact
of closely held stock on governance declines steeply from
low to high levels of governance.
Thus, we find no evidence that the impact of family firms
on ESG performance is stronger for low levels of ESG. This
is inconsistent with low levels of ESG attracting family own-

Volume •• Number •• •• 2014 © 2014 John Wiley & Sons Ltd

FAMILIES AND CSR
ership. Further, the marginally stronger impact of family
ownership on ESG scores at higher levels of ESG suggests
that the causality is from ownership to ESG. Although it is
not the focus of this study, the declining response of gover-
nance to closely held stock at high levels of governance is
interesting. Whilst closely held stock is associated with
lower governance scores, as hypothesized, this effect is
stronger for cases with low governance and is consistent
with low governance attracting closely held ownership.
Propensity Score Matching Tests of Association
Unlike our quantile regressions, propensity score matching
cannot comment on the direction of causality. However, the
test attempts to simulate a randomized experiment that
explicitly equalizes the distribution of those variables used
in the calculation of the propensity scores. We find that the
firm-specific variables used do indeed have similar means
across our treatment and control groups (results available on
request). Further, advocates of propensity score matching
suggest that we can expect other variables to be randomly
distributed between the two groups. We also find that indus-
try, country, and year averages of the dependent variables
are indistinguishable between our treatment and control
groups, and these values have not been used in the construc-
tion of the propensity scores. Thus we have no reason to
suppose that there are correlated omitted variables excluded
from our model. We find that treatment firms (with family
shareholdings of more than 10 percent) and control firms
(with family shareholdings of less than 10 percent) are indis-
tinguishable on all other observable variables. The PSM
results are reliably consistent with the OLS results reported
in Table 3. We have not included the detailed PSM results
but these are available from the authors on request.
Sensitivity Analysis
We test whether our results are robust to alternative metrics
and models. In particular, we experiment with replacing the
Worldscope computation of closely held equity with
Datastream’s calculation of total strategic shareholdings. The
results are very similar and the conclusions regarding the
hypotheses unchanged. In retaining closely held equity we
lose approximately 5 percent of the sample but prefer to
avoid the potential same-source bias that might arise from
obtaining family holding and total strategic holding from the
same data provider. We also re-estimate the regression
models using a dummy variable to identify 10 percent
closely held and family shareholdings rather than the per-
centage held. Again, the results were unchanged by the alter-
native approach.
To examine whether our results are driven by particular
elements of the ASSET4 ESG metrics, we investigate the
robustness of our results by replacing the main environmen-
tal, social, and governance scores with their components.
Whilst we have access to many elements used to compute
the ESG scores, we prefer to use the main scores published
by ASSET4, which are presumably designed to meet
demand from investment institutions, and avoid any pos-
sible data-mining bias that might arise from arbitrarily
selecting from the components. The social score has seven
© 2014 John Wiley & Sons Ltd
11
dimensions: community, diversity and opportunity,
employment quality, health and safety, human rights,
product responsibility, and training and development. All
seven dimensions have a significant negative association
with closely held equity and all have an additional signifi-
cant negative relationship with family holdings. Similarly,
the environmental score has three components: emission
reduction, product innovation, and resource reduction. All
three are significantly negatively associated with both
closely held and family ownership.
Corporate governance has five components: board struc-
ture, board functions, compensation policy, shareholder
rights, and vision and strategy. All are significantly nega-
tively associated with closely held equity and all but share-
holder rights are additionally significantly negatively
associated with family holdings. When used as explanatory
variables in place of the total governance score, all compo-
nents have a significant and positive impact on the social
score and all but board function and compensation policy
have a significant positive impact on the environmental
score. However, in allowing the coefficient to vary across
governance elements, the impact of closely held equity
changes. In Table 3, where governance was used as an
explanatory variable, closely held equity had a positive
impact on both social and environmental scores. Here the
coefficient on closely held is insignificant. This has no impact
on the hypotheses tested in this paper. They may, however,
be important in any subsequent analysis of the interaction
of governance, ownership, and social or environmental
performance.
Taken together, these sensitivity results suggest that the
main findings reported in Table 3 are supported by more
detailed analysis. There are differences in the strength of the
relationship across components, and although Rees and
Rodionova (2013) have conducted a preliminary analysis, it
would be interesting to investigate these relationships
further. However, the overall story remains the same:
closely held equity is associated with lower ESG scores in
general and family holdings have an additional negative
impact. Indeed, the responses to all sensitivity checks are
such that our conclusions on hypotheses 1–4 remain
unchanged.
Country Analysis
We start by running country-specific regressions for the 13
countries with the largest samples, the smallest of which is
334 firm-years. This is the most direct approach to investi-
gate country differences and it also acts as a powerful sen-
sitivity analysis of the pooled results. Table 4 contains the
estimated slope coefficients on our test variables for the
impact of closely held and family held equity on social, envi-
ronmental, and governance performance, and on social and
environmental after including governance as a control vari-
able. Although the slope coefficients for a number of coun-
tries are not individually significantly different from zero,
these country-specific regressions confirm the overall statis-
tical significance of our full sample tests. We report
t-statistics for each coefficient, chi-squared tests for the sta-
tistical significant of the sum of closely held and family held
equity, and F-statistics for the collective significance of each
Volume •• Number •• •• 2014
 12

TABLE 4
Country Results

Australia Canada France Germany Hong Kong Italy Japan Singapore Spain Sweden Switzerland UK USA All F-test

Volume ••
Social
Closely −.05† −.09* −.07* −.09* −.10† .25*** −.04 −.12† .10† −.09 −.04 −.16*** −.08*** 36.48***
(1.89) (2.53) (2.40) (2.19) (1.86) (4.32) (1.44) (1.96) (1.90) (1.44) (.72) (6.37) (4.59)
Family −.32*** −.41*** .05 .21*** −.13† −.14* −.45*** −.37* −.04 −.02 −.14* −.15*** −.27*** 54.10***
(4.81) (5.20) (1.02) (3.73) (1.85) (2.11) (4.85) (2.11) (.48) (.20) (2.11) (3.90) (5.39)

Number ••
Both Chi2 32.23*** 47.43*** .13 4.09* 7.60** 2.00 29.68*** 7.17** .61 1.19 8.18** 85.23*** 53.29*** 99.12***
Environment
Closely −.03 −.17* −.04 −.02 −.03 .17 −.05 −.06 .03 −.20 −.02 −.13* −.05 27.87**
(.79) (2.10) (.68) (.37) (.27) (1.41) (.79) (.54) (.39) (1.60) (.16) (2.41) (1.49)

•• 2014
Family −.19* −.33* .02 .08 −.24* −.30** −.78*** −.21 −.02 .20 −.17 −.18* −.18 76.45***
(2.34) (2.60) (.16) (.76) (2.45) (2.83) (4.58) (.79) (.19) (.61) (.97) (2.58) (1.87)
Both Chi2 8.10** 19.42*** .03 .26 5.53* 1.04 23.67*** .97 .00 .00 1.46 31.05*** 5.40* 116.27***
Governance
Closely −.13** −.17** −.36*** −.31*** −.21* −.07 −.10*** −.14 −.22* −.07 −.37*** −.22*** −.26*** 284.21***
(3.21) (3.22) (7.05) (7.16) (2.08) (.77) (4.68) (1.62) (2.59) (.90) (4.07) (3.94) (9.61)
Family −.22* −.24* −.07 .11† −.13 −.04 −.07 −.22 −.05 −.50** −.11 −.12 −.10 36.75***
(2.55) (2.09) (.72) (1.85) (1.63) (.46) (1.48) (1.24) (.47) (3.39) (1.07) (1.63) (1.22)
Both Chi2 17.51*** 12.99*** 17.57*** 9.82** 10.33** 1.08 13.31*** 4.24** 3.72* 16.93*** 16.97*** 47.09*** 19.59*** 191.90***
Social (governance
included)
Closely .01 .01 .09** .11** .05 .33*** .07* −.05 .25*** −.04 .13* −.05* .07*** 44.52***
(.61) (.23) (2.86) (2.73) (1.11) (6.25) (2.43) (.81) (5.52) (.62) (2.53) (2.15) (4.41)
Family −.23*** −.26*** .09 .14** −.04 −.11† −.38*** −.24 −.01 .17 −.06 −.09** −.21*** 39.07***
(3.84) (3.62) (1.86) (2.78) (.75) (1.91) (4.60) (1.56) (.15) (1.60) (1.04) (2.66) (4.72)
Both Chi2 13.18*** 13.81*** 12.22*** 19.54*** .01 8.91** 14.85*** 3.08* 12.00*** 1.72 1.54 21.05*** 9.99** 53.57***
Environment
(governance
included)
Closely .04† −.07* .06† .08† .08 .28*** −.01 .07 .18*** −.12 .09 −.06* .10*** 35.37***
(1.72) (2.19) (1.76) (1.77) (1.50) (4.75) (.45) (1.09) (3.95) (1.63) (1.62) (2.19) (5.15)
Family −.19** −.18* .05 .03 −.18** −.28*** −.97*** −.12 .02 .33* −.06 −.11** −.17** 69.87***
(3.16) (2.57) (.88) (.44) (2.73) (4.40) (11.09) (.68) (.29) (2.53) (.87) (2.74) (3.28)
Both Chi2 6.13* 14.54*** 3.58* 2.68 1.63 .01 131.37*** .07 8.07** 2.86* .36 22.17*** 1.96 66.30***

This table presents the results of OLS regressions of ESG performance for the period 2002 to 2012 for 13 countries separately. The dependent variable is the social,
environmental, and governance score as assessed by ASSET4 and the test variables are closely held equity and family equity holdings. Control variables are leverage,
profitability, market-to-book, and the log of capitalization, industry averages of the dependent variable, the inverse Mills ratio and year dummies. T-statistics are calculated
using company clustered standard errors. Only the slope coefficients of the key variables, Closely and Family, are reported plus the Chi2 test that the sum of both slope
coefficients is significantly different from zero. In the final column we report the F-test that the individual slope coefficients are collectively different from zero.
†p < .10.
*p < .05.
**p < .01.
***p < .001.

© 2014 John Wiley & Sons Ltd

CORPORATE GOVERNANCE
FAMILIES AND CSR 13

FIGURE 2
Comparisons of Country-Specific Impact of Family Ownership on Social, Environmental, and Governance Scores

The scatter plots contrast the total impact of family ownership (i.e., closely held plus family) averaged across social and
environmental vs. governance scores. The impact calculations are based on the results reported in Table 4. Social and
environmental (horizontal axis) vs governance (vertical axis). The social and environmental scores have been merged for
simplicity as the two separate graphs give broadly the same results

variable across the 13 countries. The estimated models are as
before using the same control variables plus year dummies
but with country averages omitted. All statistical tests are
adjusted for firm-level clustering.
Of the 13 countries the coefficient on closely held is posi-
tive for only Italy and Spain when predicting social and
environmental performance. Family held exhibits a positive
coefficient for only France and Germany when modeling
social performance, and for only France, Germany, and
Sweden when modeling environmental performance; only
Germany has a positive coefficient on family for governance.
Thus, of the 78 individual slope coefficients estimated on
closely held and family held stock, 68 are negative. We esti-
mate the collective significance using an F-test across the 13
countries, and both closely held and family held stock are
significantly different from zero, as would be expected given
our earlier pooled results. We also cumulate the effect of
closely held stock and the additional impact of the family
held portion of it. We find that 27 of the 39 estimates for
social, environmental, and governance scores are individu-
ally statistically significant, although in one instance (the
impact of closely and family held stock on the social score in
Germany) it is positive and significant.
In the models where governance is included as an
explanatory variable, we expect lower levels of statistical
significance. Governance is always positively and signifi-
cantly associated with both social and environmental scores.
In many cases closely held stock is positively and signifi-
cantly associated with social and environmental perfor-
mance after allowing for the effect of governance. However,
family retains a negative impact on social performance in 10
instances, significantly so in six, and in nine cases family is
positively associated with the environmental score, signifi-
cantly so in seven.
Taken together, the country-by-country analysis strongly
supports the general results of the pooled tests. However, it
is also clear that (a) where the samples are smaller it is
difficult to generate country-specific statistically significant
results and (b) there are considerable inter-country differ-
ences. This is to be expected and we have hypothesized that
we should be able to identify differences between those
countries that have a liberal market economy and those that
have a coordinated market economy. In Figure 2 we plot the
country-by-country impact of family ownership (the com-
bined response to closely held and family variables) on gov-
ernance and an average of the response for social and
environmental scores, as the individual graphs are very
similar.
Our first conclusion from Figure 2 is that Australia,
Canada, Hong Kong, Singapore, the UK and the US have a
very similar and strong negative response to family owner-
ship. These common law countries, with large stock markets
and relatively good investor protection, seem to respond in
similar ways despite obvious social, cultural, and geographi-

© 2014 John Wiley & Sons Ltd Volume •• Number •• •• 2014

14
cal differences. Our interpretation is that the strong agency
incentives caused by the shared stock market orientation
and effective investor protection override other differences.
The second conclusion is that there is little agreement
amongst the results for the European-based CMEs. These are
all code law countries with relatively low investor protection
rights and, apart from Switzerland, relatively small stock
markets. The response of both social and environmental
scores to family ownership is typically weak, although stron-
gest for Switzerland, but the response of governance is very
varied. For France, Sweden, and Switzerland it seems strong,
and stronger than that for the LMEs, yet for Italy, Germany,
and France it seems relatively weak. A possible explanation
lies in the absence of the dominant influence of any single
factor such as the influential stock market effect in the LMEs
and so the diversity in country institutional and economic
circumstances comes out.
Finally we should note the unique response of the Japa-
nese sample. It is clear that the Japanese environment is
rather different from others that might be designated as
CMEs, but even so the results for Japan stand out as particu-
lar. The governance response to family ownership is similar
to that for Germany and Italy; however, the association of
both social and environmental scores with family ownership
is particularly strong even in comparison with the LME
countries in our sample. A possible explanation could be
that Japan has a relatively large stock market which has been
a major source of financing for firms (Kang & Moon, 2012),
and relatively high investor protection when compared with
other CMEs. Consequently, investors, including families,
are able to effectively resist environmental and social
expenditure.
We use the results reported in Table 4 to test the hypoth-
esis that the response to ownership differs between LME
and CME countries. Here we use classifications from prior
literature that treat Australia, Canada, Hong Kong, Singa-
pore, the UK, and the USA as LMEs and Italy, France,
Germany, Japan, Spain, Sweden, and Switzerland as CMEs
(Djankov, La Porta, Lopez-de-Silanes, & Shleifer, 2008;
Jackson & Apostolakou, 2010). In validating this classifica-
tion we note that all LMEs are common law whilst all CMEs
are code law, that all LMEs have better investor protection,
as measured by the anti-directors rights index, than all
CMEs and, apart from Switzerland, all LMEs have relatively
larger stock markets, adjusted for GDP, than all CMEs. We
do not assert that the two groups are homogeneous but that
there are clear general differences between the groups (van
Essen, Engelen, & Carney, 2013).
We find that the average response of social performance in
LME countries to the sum of the family and closely held
ownership coefficients is significantly greater (more nega-
tive) than for CME (Chi2 = 10.16, p < .01), and is somewhat
stronger if we remove Japan from the analysis (Chi2 = 14.44,
p < .001). These results are slightly weaker but still signifi-
cant if we examine the additional impact of family owner-
ship alone. The result including Japan is significant at 95
percent (Chi2 = 4.26, p < .05) and, when excluding Japan
from the CME sample, the result is significant at 99 percent
(Chi2 = 7.49, p < .01). This is consistent with hypothesis 5.
The average response of environmental performance to
the impact of family plus closely held ownership is less
Volume •• Number •• •• 2014
CORPORATE GOVERNANCE
robust, with the difference between LME and CME coun-
tries insignificant if Japan is included (Chi2 = .36, insignifi-
cant) but significant if it is omitted (Chi2 = 5.02, p < .05). If
we restrict our analysis to family ownership alone our
results are insignificant if Japan is included (Chi2 = .09, insig-
nificant) and marginally significant if not (Chi2 = 3.51,
p < .10). This is weakly consistent with hypothesis 5 only if
Japan is excluded from the CME sample. Finally, we are
unable to demonstrate a statistically significant difference
between the responses of governance to ownership for CME
versus LME countries whether or not Japan is included, i.e.
hypotheses 5 is not supported for governance.
Overall, our results suggest the need for further research.
The LME countries all respond to closely held and family
ownership in similar ways. However, among the CME coun-
tries there is considerable diversity. Japan’s social and envi-
ronmental response to ownership is much stronger than the
other CME countries, and the governance response is very
diverse, with Germany, Italy, Japan, and Spain exhibiting a
modest negative response, weaker than the LME countries,
and France, Sweden, and Switzerland displaying a strong
negative response, and stronger than the LMEs. That Japan
is different from the European CMEs is unsurprising given
its particular institutional and cultural characteristics
(Buchanan, 2007; Kang & Moon, 2012; Solomon, Solomon, &
Suto, 2004). Interestingly, the Asian LMEs behave very much
like the other LMEs, whilst the European CMEs reveal quite
disparate responses of governance to closely held and family
ownership.
DISCUSSION AND CONCLUSION
It can be argued that undiversified shareholders, such as
family equity holders, will oppose ESG investment as at
least a proportion of that investment may be value-
destroying. Thus, significant family shareholders may have
both the influence and incentive to resist ESG. Using a large
and recent international sample we show that closely held
stock is associated with lower ESG performance as assessed
by ASSET4 and that this is particularly true for family
shareholdings. This is consistent with family shareholders
discouraging ESG investment but it is also consistent with
low ESG performance encouraging family investors to retain
their shareholding. In a panel data regression model, where
the variables of interest are stable within firms across time, it
is difficult to demonstrate that the models are not contami-
nated by endogeneity. In particular, it is difficult to demon-
strate the direction of causality.
Firstly we control for sample selection bias. Our propen-
sity score matching tests are less likely to be affected by
omitted variables as they represent an attempt to mimic
random allocation. Whilst not definitively free of contami-
nation, they offer support for the prediction that there is a
negative relationship between family equity holdings and
ESG scores. Furthermore, we use quantile regressions to test
the influence of family equity on ESG for firms that have
high ESG rankings, and again find a negative relationship.
Thus, we show that the negative relationship holds even
where low ESG cannot have encouraged family stockholders
to retain their holding.
© 2014 John Wiley & Sons Ltd
FAMILIES AND CSR
Some limitations to our study should be noted. Firstly,
throughout the analysis we have assumed that the ASSET4
social, environmental, and governance measures are indica-
tive of underlying performance. While we cannot directly
assess whether this is the case, previous work has shown
ASSET4 scores to be highly correlated with other measures
on ESG performance such as FTSE4Good or MSCI (previ-
ously KLD) (Semenova, 2010). Jackson and Apostolakou
(2010) argue that it is an advantage when an ESG database
includes policy indicators as well as performance measures
(e.g., greenhouse gas emissions or water use). In the case of
ASSET4, its scores are based on a variety of indicators
reflecting both disclosed policies and more objective
metrics. Examples of the latter in the environmental dimen-
sion include reported CO2 emissions, produced amount of
hazardous waste, recycled water, and energy use. Examples
of performance metrics in the social theme include percent-
age of revenues generated from tobacco or gambling,
number of controversies in the media linked to public health
and safety, and use of employee stock options. Governance
dimension includes metrics such as board size, CEO/
Chairman duality, and use of performance-based executive
compensation. In our study, we have used the aggregated
environmental, social, and governance scores and tested
sensitivity of the findings to using theme sub-scores (e.g.,
instead of overall governance score we used board structure,
board function, compensation policy, shareholder rights,
and vision and strategy sub-scores). Our results regarding
the influence of family ownership on all three dimensions
remained robust to these alternative ESG measures. We have
used a variety of data sources and empirical methods and
our results are clearly consistent with the premise that
closely held equity holders in general, and family sharehold-
ers in particular, are associated with lower ESG perfor-
mance. Future research could look more closely into the
influence of family ownership on more specific ESG projects,
in particular what types of projects family firms do invest in.
Prior evidence suggests that the long-term nature of family
ownership and the emotional attachment of the owners to
the firm increase the propensity to invest in relations with
stakeholders, such as employee, customers, and the wider
community (Le Breton-Miller & Miller, 2006). Yet empirical
evidence suggests that the response of family ownership to
activities in environmental and social areas is strong and
negative. Consequently, establishing the areas that families
perceive to be important to improve the stakeholder envi-
ronment is a relevant issue for further investigation.
A second important caveat of our study is the ownership
measure. Following prior studies, we used the percentage of
equity held by employees/families (Anderson & Reeb, 2003;
Andres, 2008; Miller, Minichilli, & Corbetta, 2013). We
acknowledge that there are other dimensions of family firms
reflecting commitment to and involvement in the firm, for
example number of family generations or governance by a
founding member (Kuo & Hung, 2012; Maury, 2006; Miller
et al., 2013). However, ownership stake reflects both the
interest in the financial performance of the firm and the
ability of the owner to monitor management decisions
(Shleifer & Vishny, 1986). Consequently, our chosen measure
serves the aim of the paper to investigate how family owners
© 2014 John Wiley & Sons Ltd
15
with substantial equity positions act towards environmental,
social, and governance activities of the firm and how their
influence is different from other blockholders with closely
held equity.
Our study has also investigated the relationship between
environmental and social scores and closely held equity via
corporate governance. In the main we find that closely held
equity does not have a reliable impact on social and envi-
ronmental performance once governance has been
accounted for. Thus, closely held ownership may impact on
social and environmental performance but mainly via its
impact on governance. Conversely, we find that family
shareholdings may impact on social and environmental
scores even after allowing for the intervening effect of gov-
ernance. This result is less robust than the direct impact
estimated without an intervening governance variable, but is
consistent with family equity holders influencing the social
and environmental performance directly.
We are also able to use the wide international distribution
of our sample to examine how the institutional differences
impact on the relationship between closely held stock and
ESG. The results for the six LME countries examined are
remarkably consistent. Ownership significantly affects ESG
and in all countries. Conversely, we find considerable diver-
sity in the results for our seven CMEs. In all but Japan closely
held stock has little impact on social and environmental
scores, and the impact on governance varies widely with a
strong response in France, Switzerland, and Sweden and a
weak response in Germany, Italy, Spain, and Japan. Previous
studies have argued that CME is a less coherent classifica-
tion than LME (Jackson, 2005; Yoshikawa & Rasheed, 2009)
and our results are consistent with that notion. They have
also proposed that Japan cannot be readily classified with
other countries, and the particularly strong response of
social and environmental scores to closely held stock and the
weak response of governance to the same confirm Japan’s
uniqueness.
Our findings have practical implications. The threat from
environmental degradation is clear, the social performance
of firms is an issue of increasing importance, and the failures
of corporate governance are cited as partly responsible for
the recent and continuing economic crisis. Under these cir-
cumstances regulators, governments, and stakeholders will
be concerned to improve corporate ESG performance. Our
results suggest that particular attention may need to be paid
to firms with substantial closely held ownership and particu-
larly in economies that could be classified as LMEs. The
implications of our results are that, should we wish to
improve ESG performance, diversified shareholding should
be encouraged or regulations and institutions established to
improve the performance of firms with substantial closely
held ownership. Good governance seems to limit the impact
of closely held stock on social and environmental perfor-
mance in general but not in the case of family ownership.
This is unsurprising where undiversified family ownership
provides both incentive and influence. This influence would
be directly applied when family members participate in
management and may explain the limited impact of gover-
nance on the influence of family ownership regarding social
or environmental performance.
Volume •• Number •• •• 2014
16
ACKNOWLEDGEMENTS
The authors greatly appreciate helpful feedback received at
the paper development workshop of the Family Business
Conference 2014 in Singapore. The authors are also thankful
to the participants of the British Accounting and Finance
Association (BAFA) Annual Conference 2014, to workshop
participants at the universities of Amsterdam and WHU and
to Prof. Jo Danbolt and Susan Hancock for helpful comments
and advice. Finally, the authors would like to particularly
thank the Associate Editor of the special issue and three
anonymous reviewers for their insightful and useful
suggestions.
NOTES
1. ASSET4 is an ESG database from Thomson Reuters which uses
publicly available information including CSR and annual
reports, company websites, proxy filings, NGO information, and
Carbon Disclosure Project. The environmental, social, and
governance scores are computed using over 750 indicators. In
particular, the environmental score includes metrics covering
Volume •• Number •• •• 2014
CORPORATE GOVERNANCE
resource reduction, emission reduction, and product innovation;
the social score includes employment quality, health and safety,
training and development, diversity, human rights, community
and product responsibility; and governance includes board
structure, compensation policy, board functions, shareholder
rights, and vision and strategy. More detail on ASSET4 method-
ology is available at http://extranet.datastream.com/data/
ASSET4%20ESG/Index.htm.
2. According to the Worldscope definition, closely held equity
includes shares held by insiders (e.g., directors and their fami-
lies), any other corporations and financial institutions, and indi-
vidual blockholdings over 5 percent.
3. The Datastream family ownership variable represents strategic
equity of 5 percent or more held by employees or (typically)
family members. Given the broad definition, we have also ran-
domly selected a sample of firms that were identified as having
large family shareholding, and checked company websites. We
found Datastream data to be overall consistent, with almost all
companies having family members in control, for example on
the board of directors.
4. ASSET4 database covers a universe of over 4,000 companies
from all major stock indices such as S&P 500, NASDAQ 100,
MSCI World, MSCI Emerging Markets, CAC40, DAX, FTSE250,
STOXX600, ASX 300, SMI, and Bovespa.
© 2014 John Wiley & Sons Ltd
FAMILIES AND CSR 17

APPENDIX
Distribution and Characteristics of the Sample by Country

Country Sample Social Environment Governance Closely Family Leverage Profitability MTB Log(MV)

Australia 1,329 40.57 40.92 61.60 32.05 3.03 46.51 46.84 49.59 14.42
Austria 152 53.57 53.76 30.96 43.77 6.98 56.97 50.07 42.33 14.96
Belgium 213 46.46 51.61 45.78 42.29 6.63 56.24 51.86 41.10 15.33
Brazil 157 70.38 56.15 27.41 47.88 1.86 54.92 63.57 48.71 16.16
Canada 1,139 39.49 38.66 72.72 13.17 2.63 49.04 44.91 48.83 14.82
Chile 58 49.14 47.79 11.09 60.46 11.36 62.79 61.72 60.14 15.83
China 259 27.99 28.87 25.83 57.86 5.77 40.10 59.65 47.47 15.64
Colombia 12 43.17 38.96 38.02 55.69 .00 42.50 53.17 43.33 16.59
Czech Rep. 12 71.58 55.89 16.63 66.03 .00 42.00 72.50 54.75 16.30
Denmark 191 52.43 57.94 32.74 30.29 1.93 49.09 60.76 56.11 14.98
Egypt 8 28.87 11.56 10.43 74.15 .00 31.13 58.00 32.75 15.11
Finland 224 66.75 72.72 56.03 20.29 2.53 46.03 55.80 47.64 15.05
France 770 76.18 75.31 51.46 34.36 6.46 59.05 48.71 46.30 16.07
Germany 557 66.48 66.57 31.34 35.20 8.92 57.22 48.41 45.76 15.69
Greece 105 51.16 48.37 19.26 46.12 10.74 59.33 53.97 42.59 14.20
Hong Kong 450 41.24 36.62 30.74 50.74 8.09 37.85 56.89 44.25 15.64
Hungary 13 82.66 76.45 43.28 32.20 2.69 59.77 46.46 25.92 15.35
India 179 63.71 56.72 30.54 53.95 10.34 51.58 69.69 69.13 16.22
Indonesia 63 61.81 42.58 23.98 60.99 .32 31.68 81.98 77.24 15.81
Ireland 151 39.78 41.74 61.30 19.11 4.90 69.31 58.92 54.05 14.66
Israel 39 44.58 39.82 35.91 33.12 3.54 66.67 63.13 62.36 15.61
Italy 415 61.63 51.34 36.67 39.61 10.18 69.68 44.15 41.84 15.62
Japan 3,172 46.41 63.13 11.99 28.72 1.35 45.63 35.92 37.71 15.33
Korea 196 60.33 66.23 18.36 33.04 5.17 48.76 52.40 39.07 15.72
Malaysia 106 46.69 40.39 42.86 47.85 2.38 51.87 55.90 55.87 15.45
Mexico 37 48.59 41.67 14.96 58.30 13.11 52.30 69.11 55.62 16.40
Missing 762 36.95 37.12 41.47 32.76 4.59 47.93 47.57 46.78 15.18
Morocco 8 68.29 23.43 5.19 67.49 .00 47.75 83.38 80.75 16.14
Netherlands 283 76.38 68.48 66.49 20.96 4.54 60.72 53.95 48.64 15.78
New Zealand 84 42.57 46.92 54.30 44.32 .00 56.69 48.62 47.88 14.21
Norway 203 59.44 55.97 51.65 31.53 .98 57.89 54.57 58.50 14.93
Peru 4 38.64 27.49 48.26 35.88 28.00 21.50 76.75 83.00 15.96
Philippines 27 43.21 36.73 30.76 63.61 9.19 65.81 69.30 62.78 14.99
Poland 61 37.99 30.76 17.65 55.59 3.13 34.97 49.98 37.90 15.11
Portugal 108 75.45 67.14 49.23 52.06 2.19 84.88 54.66 51.43 15.21
Russia 101 58.17 44.99 24.70 66.23 3.69 44.05 56.57 38.02 16.44
Singapore 334 36.48 34.20 38.84 53.71 1.72 45.49 59.37 45.98 15.02
South Africa 158 79.14 65.14 62.65 33.36 .87 39.37 63.59 60.30 15.58
Spain 394 73.58 68.66 45.59 42.46 8.53 65.68 59.11 55.24 15.62
Sweden 462 63.02 65.56 51.38 20.68 3.54 57.10 57.35 46.89 15.15
Switzerland 474 57.69 59.00 48.23 24.90 12.09 43.15 55.39 57.51 15.45
Taiwan 186 41.93 48.47 13.97 25.38 1.71 37.70 53.45 47.71 15.37
Thailand 47 53.62 39.38 45.57 51.41 1.96 52.11 72.19 61.87 15.52
Turkey 67 52.97 45.50 15.34 65.46 8.07 49.82 70.73 46.27 15.60
UAE 2 23.81 35.61 33.75 80.45 .00 70.50 32.00 3.00 15.84
UK 2,770 63.40 59.60 69.97 16.65 4.44 52.52 56.41 52.94 14.75
USA 7,360 44.87 40.75 73.63 12.83 1.41 54.72 53.16 57.02 15.78
Total 23,902 50.76 50.53 53.04 24.99 3.42 51.95 51.01 50.45 15.38

The sample represents all firm-year observations in the ASSET4 universe for which ESG scores, closely held equity and family held equity
measures and control variables are available during the period 2002–2012. The Social, Environment, and Governance variables are the
ASSET4 assessment of the firms’ performance on each of those dimensions, Closely and Family are respectively the Worldscope and
Datastream measures of closely held stock in total and those holdings attributable to family or employees. Leverage, Profitability, and
Market-to-book (MTB) are the cross-sample percentiles of each variable where the original ratios are calculated as long-term debt over
long-term debt plus equity, net income over equity, and market value of equity over book value of equity. respectively. The log of market
capitalization (log(MV)) is calculated using US$ values.

© 2014 John Wiley & Sons Ltd Volume •• Number •• •• 2014

18
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William Rees is Professor of Financial Analysis at the Uni-
versity of Edinburgh Business School and Co-chair of the
Doctoral Colloquium of the European Accounting Associa-
tion. He is also a Fellow of the ICAEW, holds a PhD from the
University of Glasgow and an MBA from the University of
Liverpool. Before joining the University of Edinburgh he
was at the University of Amsterdam where he was Director
of the Business School. His research focuses on the work
of financial analysts, international accounting practices,
corporate social responsibility, earnings quality, and firm
valuation.
Tatiana Rodionova is Lecturer in Finance at the University
of Edinburgh Business School. She holds a PhD from the
University of Edinburgh. Her research interests are in the
area of corporate governance, responsible investment, inves-
tor engagement, financial analysis, and insurance.
Volume •• Number •• •• 2014