Unveiling the Unseen Forces in Corporate Relocations: A Closer Look at Shareholder Influence

In our recent study into corporate relocations, we aimed to understand the influence of socially-responsible shareholders on decisions to relocate headquarters (HQs) internationally to gain tax benefits. While one might assume that the sense of responsibility among these shareholders, including entities like public pension funds and family owners, is universal, our findings suggest otherwise.
 
Tax-motivated relocations, although financially beneficial for firms, deprive the domestic government of essential tax revenues and often negatively impact local employment. It seems logical that firms, especially those overseen by socially-responsible shareholders, might be cautious about such moves. Our findings confirm this and reveal a nuanced detail: socially-responsible shareholders are notably more proactive in preventing tax-motivated HQ relocations when they are based domestically rather than abroad.
 
This indicates that socially-responsible shareholders consider the well-being of stakeholders more deeply when a common nationality is shared. Their responsibility appears to lean more heavily towards compatriots, revealing a tangible affinity bias. Additionally, our research highlights the critical role CEOs play in how this bias is manifested in firms’ social responsibility decisions. Specifically, we observed that socially-responsible domestic shareholders are more effective at preventing tax-motivated HQ relocations when the firm’s CEO is also domestic.
 
Our study illuminates the often-underestimated power and nuanced biases of socially-responsible shareholders. The findings underscore the importance of recognizing and understanding the subtle influences that shape the corporate landscape, offering a new perspective on the interplay between ethical considerations and strategic business decisions.

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