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Company ESG performance and institutional investor ownership preferences

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  • Li Wei
  • Wu Chengshu

Abstract

Heterogeneous institutional investors' shareholding preferences have been driven to change by the deepening of ESG investment philosophy. Therefore, we examine the impact of corporate ESG performance on institutional investors' shareholding preferences and its mechanism of action. We conduct mixed OLS and mediation effect tests using data on ESG responsibility scores and institutional investors' shareholding ratios of A‐share listed companies in China from 2010 to 2020 as samples. We find that corporate ESG performance can significantly and robustly increase institutional investors' shareholdings; the mediation effect analysis shows that overall corporate ESG performance contributes to increases in corporate book and market values, thus encouraging institutional investors to increase their shareholdings. The heterogeneity analysis shows that independent institutional investors attach more importance to corporate ESG responsibility performance, and long‐term institutional investors attach more importance to corporate environmental performance; moreover, institutional investors have more significant ESG shareholding preferences for Chinese SOEs. Our study can strengthen the encouragement of institutional investors to integrate ESG investment concepts from multiple perspectives, such as research and analysis, portfolio management, risk control, and due diligence management, to design and develop targeted ESG investment tools, give full play to the role of shareholders and guide the sound development of listed companies from the perspective of investment strategy objectives.

Suggested Citation

  • Li Wei & Wu Chengshu, 2024. "Company ESG performance and institutional investor ownership preferences," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 33(3), pages 287-307, July.
    • Handle: RePEc:wly:buseth:v:33:y:2024:i:3:p:287-307
    DOI: 10.1111/beer.12602
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    7. Daniele Giordino & Andrea Sestino & David Zàmek & Dorra Yahiaoui, 2026. "The impact of institutional ownership structure on corporate ESG performance: empirical evidence for the European capital market," Review of Managerial Science, Springer, vol. 20(2), pages 537-578, February.

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