Abstract: This paper systematically analyzes the mechanism of institutional investors' impact on corporate social responsibility (CSR) from the perspective of voting with their hands and voting with their feet, and empirically examines the differences of CSR improvement between domestic and foreign institutional shareholders. The study find that institutional investors help companies fulfill their social responsibilities, and foreign institutional investors' positive effects are more pronounced than domestic institutional investors. Since China's A-shares joined MSCI, CSR of constituent companies has increased significantly due to the allocation of funds by overseas institutions. Further analysis shows that for listed companies with smaller assets and higher equity concentration, institutional investors have greater positive impact on CSR; public equity funds, sunshine private equity, insurance companies, and social security fund promote CSR, while financial products issued by brokers have negative influence on CSR. The above conclusions are still robust after controlling the endogenous problems.

Key words: corporate social responsibility, capital marker, institutional investor, foreign ownership