Public Fund Holdings Improve Corporate ESG Performance—Evidence from the Chinese A-Share Market

ESG performance is an important lever for promoting the sustainable development of enterprises. To examine the effect of fund holdings on corporate ESG performance, this study employs the dynamic panel GMM method to perform an empirical analysis using quarterly data of Chinese A-share listed firms from 2009 to 2024. The findings show that public fund holdings contribute to better corporate ESG performance. The analysis of the impact mechanism shows that the improvement effect of public fund holdings on corporate ESG performance is mainly achieved through four channels: increasing information transparency, reducing earnings management, increasing corporate innovation investment, and reducing corporate debt financing costs. Heterogeneity analysis shows that the improvement effect of public fund holdings on corporate ESG performance is more significant in high-tech enterprises, heavily polluting industry enterprises, and enterprises with high analyst attention. Further analysis reveals that different types of institutional holdings have a positive impact on corporate ESG performance. Public fund holdings not only promote corporate ESG performance but also enhance corporate efficiency and reduce operational risks. The research conclusion provides empirical evidence from fund investors on the impact of public fund holdings on corporate sustainable development.