Examining institutional investor preferences: The influence of ESG ratings on stock holding in China's stock market

Jin Zou, Xiaoying Zhong, Chi Gong and Xiaoye Lu

Research in International Business and Finance, 2025, vol. 73, issue PA

Abstract: Amidst the global rise in ESG investing, this study scrutinizes China's institutional investors' preference for high-ESG stocks. Utilizing A-share data from 2015 to 2022, our analysis reveals a strong preference for high-ESG stocks, driven by their potential to reduce operational risks, enhance profitability, and reputation. This preference is further amplified by significant analyst report coverage, yet moderated by disparities in ESG ratings. We also observe a distinct trend among independent investors, who favor high-ESG firms, particularly in non-state-owned sectors and in smaller companies within high-pollution industries. The findings suggest that guiding institutional investments towards ESG can steer China’s capital market towards more environmentally friendly businesses, thereby promoting sustainable economic development.

Keywords: Institutional shareholding; ESG investment; ESG Rating discrepancies (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:73:y:2025:i:pa:s0275531924004021

DOI: 10.1016/j.ribaf.2024.102609

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