Institutional Cross-Ownership and Corporate Sustainability Performance: Empirical Evidence Based on United Nations SDGs Ratings

Corporate sustainable development, as a critical component of Chinese-style modernization, is essential for achieving high-quality economic growth, yet the influence of institutional cross-ownership—a prevalent phenomenon in stock markets—on corporate sustainability performance remains contested. Using a sample of Chinese A-share listed companies from 2012 to 2023, this study innovatively employs micro-level data on the degree of the achievement of the United Nations Sustainable Development Goals (SDGs) to measure corporate sustainability performance and investigate the influence of institutional cross-ownership on corporate sustainability performance. This study presents the following findings: (1) Institutional cross-ownership undermines corporate sustainability performance, a finding that remains robust to a series of endogeneity and robustness tests. (2) Mechanism analysis reveals a triple erosion effect: short-termism driven by institutional investors’ preference for immediate financial returns, market power through cross-ownership that dampens competitive pressures, and reduced green innovation investments that weaken sustainability. (3) This negative effect is more pronounced in firms located in high-productivity regions or central and eastern China, in firms facing lax environmental regulations, and in state-owned enterprises. (4) The impact of cross-ownership on sustainability performance varies across dimensions, with the negative effects concentrated in the economic and social dimensions. This study enriches the literature on the factors influencing corporate sustainability performance, providing new empirical evidence for governments to guide institutional investors in long-term value investment and firms to implement effective sustainable development strategies.