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How does green industrial policy influence institutional investor ownership? Evidence from a quasi-natural experiment

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  • Mbanyele, William
  • Liu, Ying
  • Qu, Xinwei
  • Huang, Hongyun

Abstract

This paper investigates whether institutional investors respond to green industrial policies. Although previous research has largely emphasized the adverse effects of climate risks on investor behavior, little evidence exists on how supportive policy shocks shape capital allocation. Using data from 3554 Chinese listed firms between 2013 and 2023, we assess whether institutional investors increase holdings in policy-endorsed firms. Results show that institutional investors substantially raise ownership in green factory firms, with stronger effects among both green-focused and general investors. Two mechanisms (i.e., signaling and strategic resource advantages) appear to drive this response. Moreover, policy-endorsed firms later exhibit higher firm value, better environmental disclosure quality, and greater environmental protection investment. These findings demonstrate that green industrial policies can redirect capital by influencing investor demand, providing timely evidence on the link between finance and sustainability.

Suggested Citation

  • Mbanyele, William & Liu, Ying & Qu, Xinwei & Huang, Hongyun, 2025. "How does green industrial policy influence institutional investor ownership? Evidence from a quasi-natural experiment," Global Finance Journal, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:glofin:v:68:y:2025:i:c:s104402832500136x
    DOI: 10.1016/j.gfj.2025.101209
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