Endogenous bifurcation into environmental CSR and non-environmental CSR firms by activist shareholders

This paper proposes a new and simple partial equilibrium model in which environmental corporate social responsibility (ECSR) firms arise endogenously through changes in the composition of their shareholders. Our model has two types of shareholders: profit seekers who aim to maximize dividends from their equities and environmental activists who demand not only monetary profits but also environmental investments from firms. The objective function of firms is a weighted average of both types of shareholders' utilities, and its weight is the proportion of their shareholdings. As a result of equity trades in a perfect competitive market, firms bifurcate into ECSR and non-ECSR firms even if they were homogeneous at establishment.