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Investment horizons and ESG decoupling: Distinct roles of long-term and short-term institutional investors

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  • Eliwa, Yasser
  • Elmaghrabi, Mohamed E.

Abstract

This paper examines how the investment horizon of institutional investors influences ESG decoupling (ESGD), using a sample of 36,055 firm-year observations from 41 countries over the period 2005 to 2023. Our findings reveal that long-term institutional investors significantly reduce ESGD, whereas short-term investors show no significant effect. This suggests that regulatory frameworks should incentivize long-term institutional ownership to enhance corporate accountability and promote more sustainable ESG practices.

Suggested Citation

  • Eliwa, Yasser & Elmaghrabi, Mohamed E., 2025. "Investment horizons and ESG decoupling: Distinct roles of long-term and short-term institutional investors," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000448
    DOI: 10.1016/j.econlet.2025.112207
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    References listed on IDEAS

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    1. Brian J. Bushee, 2001. "Do Institutional Investors Prefer Near†Term Earnings over Long†Run Value?," Contemporary Accounting Research, John Wiley & Sons, vol. 18(2), pages 207-246, June.
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    3. Di, Ran & Li, Changqing, 2023. "The cost of hypocrisy: Does corporate ESG decoupling reduce labor investment efficiency?," Economics Letters, Elsevier, vol. 232(C).
    4. Wei Jiang & Asokan Anandarajan, 2009. "Shareholder rights, corporate governance and earnings quality: The influence of institutional investors," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(8), pages 767-791, September.
    5. Yasser Eliwa & Jim Haslam & Santhosh Abraham & Ahmed Saleh, 2024. "The power of oversight: institutional investors as moderators of the earnings quality-information asymmetry nexus in Europe," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 33(1), pages 68-103, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ESG decoupling; Investment horizon; Long-term institutional investors; Short-term institutional investors;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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