Socially responsible investment and financial institution's response to secondary stakeholder requests

In order to gain influence over firms, secondary stakeholders can opt for socially responsible investment (SRI) – an investment approach that uses both financial and non-financial criteria to determine which assets to purchase [Guay, T., J. P. Doh, and G. Sinclair. 2004. “Non-governmental Organizations, Shareholder Activism and Socially Responsible Investments: Ethical, Strategic and Governance Implications.” Journal of Business Ethics 52 (1): 125–139]. In this article, we argue that SRI, besides a tactic to gain influence over firms, can also be seen as a financial institution's characteristic on the basis of which secondary stakeholders can decide to (not) target a financial institution. It is theorized – based on organizational legitimacy theory – that a financial institution's supply of socially responsible financial products (proxied by the number of products and/or assets/deposits managed) signals a financial institution's likelihood of response to specific stakeholder requests. This relationship is theorized to be positive: the more important SRI is to a financial institution, the higher the likelihood of response to such requests.