Can Multiple Large Shareholders Mitigate Environmental, Social, and Governance (ESG) Controversies?

Xiaolu Feng (), Norman Mohd Saleh, Kamarul Baraini Keliwon and Aziatul Waznah Ghazali
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Xiaolu Feng: Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
Norman Mohd Saleh: Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
Kamarul Baraini Keliwon: Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
Aziatul Waznah Ghazali: Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia

World, 2025, vol. 6, issue 1, 1-24

Abstract: This study examines the effect of multiple large shareholders (MLS) on environmental, social, and governance (ESG) controversies and the factors that moderate this relationship. It is motivated by the need to understand the determinants of ESG controversies and the lack of consensus in the academic literature regarding the corporate governance role of MLS. Using a panel dataset of Chinese-listed firms from 2008 to 2023, we found that firms with MLS have fewer ESG controversies than non-MLS firms, including those in the environmental, social, and governance dimensions. The findings are robust across different model specifications and alternative variable measurements. Further analyses revealed that the effect of MLS on ESG controversies is more pronounced when the ownership distribution between non-controlling MLS and the controlling shareholder is more balanced, when they have the same identity, and when institutional investors are part of non-controlling MLS. Additionally, this effect is stronger in firms with severe agency conflicts and weaker governance mechanisms. Finally, and more importantly, we found that ESG controversies have a significant negative impact on firm value and that MLS monitoring can help mitigate these adverse effects. In summary, our results suggest that MLS play a monitoring role in ESG controversies and contribute to firm value by reducing their negative consequences.

Keywords: multiple large shareholders; ESG controversies; agency conflicts; firm value (search for similar items in EconPapers)
JEL-codes: G15 G17 G18 L21 L22 L25 L26 Q42 Q43 Q47 Q48 R51 R52 R58 (search for similar items in EconPapers)
Date: 2025
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