 Entrepreneurial finance and sustainability: Do institutional investors impact the ESG performance of SMEs?Wolfgang Drobetz, Sadok El Ghoul, Omrane Guedhami, Jan P. Hackmann and Paul P. Momtaz Journal of Business Venturing Insights, 2024, vol. 22, issue C Abstract: Institutional investors improve the environmental, social, and governance (ESG) performance of small- and medium-sized enterprises (SMEs). Our difference-in-differences framework shows that the backing from private equity and venture capital funds leads to an increase in SMEs’ externally validated ESG scores compared to their matched non-investor-backed peers. Consistent with “ESG-as-insurance” theory, the ESG performance of SMEs with a higher probability of failure is more likely to benefit from the backing of institutional investors. This positive effect is heterogeneous; while SMEs with high ex-ante ESG performance further improve their ESG performance following institutional investor backing, SMEs with low ex-ante ESG performance are unlikely to implement any improvements. Entrepreneurial finance seems to help sustainable entrepreneurs transform into “sustainability champions,” while neglecting the betterment of non-sustainable SMEs. Keywords: Entrepreneurial finance; Venture capital; Private equity; Sustainability; Environmental, social, and governance (ESG); Corporate social responsibility (CSR) (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jobuve:v:22:y:2024:i:c:s2352673424000507 DOI: 10.1016/j.jbvi.2024.e00498 Access Statistics for this article Journal of Business Venturing Insights is currently edited by Dimo Dimov More articles in Journal of Business Venturing Insights from Elsevier |
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