The green governance effect of retail investor attention: Evidence from China's investor interactive platforms

Zhenyi Yang, Rijing Lu, Rui Lu and Qi Yan

Pacific-Basin Finance Journal, 2025, vol. 93, issue C

Abstract: As the climate issues intensify, corporate environmental performance has garnered greater attention globally. Beyond environmental regulations, a market-oriented approach to govern corporate environmental behavior is urgently needed. Based on account-level data from China's two investor interactive platforms, namely the “eHuDong” and “HuDongYi” of Shanghai and Shenzhen Stock Exchanges, we empirically find that retail investor attention can exert a significant green governance effect by curbing corporate greenwashing behavior. This effect operates through enhancing minority shareholder activism and drawing attention of other stakeholders. Moreover, we find that the green governance effect of retail investors complements the effect of local environmental regulations but is less evident in companies under great financial pressure. Further research reveals that retail investor attention not only reduces environmental information disclosure but also increases corporate environmental investment and green patents, thereby elevating the overall ESG ratings. This paper provides both theoretical support and empirical evidence for leveraging the green governance effect of retail investors to foster sustainable development.

Keywords: Retail investor attention; Corporate greenwashing; Green governance; Investor interactive platform; China (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25001854

DOI: 10.1016/j.pacfin.2025.102848

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