The impact of institutional investors on ESG: Evidence from China

Jinchi Liu, Xiong Xiong, Ya Gao and Jin Zhang

Accounting and Finance, 2023, vol. 63, issue S2, 2801-2826

Abstract: This paper studies the influence of institutional ownership on the Chinese A‐shares' ESG performance. Findings reveal the positive improvement from institutional investors, and this impact is stronger in firms with better‐expected ESG performance and low initial ESG performance. Besides, heterogeneous institutional investors have different influences, and only a pressure‐resistant institution plays the promotion role. Further studies based on the period following the financial crisis and when emphasising the environmental protection policy reveal that financial motivation and reputation motivation could be the reason for institutional holding. Our findings are robust after using the instrumental variable analysis, controlling for firm fixed effects, and replacing institutional holdings, and could be beneficial for the governance of firms in China.

Date: 2023
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