Distracted capital, fading green: the influence of institutional investor distraction on corporate green innovation

Purpose This study aims to analyze in depth the internal mechanism and boundary conditions of the role of institutional investor distraction in corporate green innovation on the basis of insights from agency theory and from the perspective of the willingness and ability of executives to engage in opportunistic behavior in green innovation decisions. Design/methodology/approach Using the panel data of Chinese listed companies from 2007 to 2023, the authors obtained empirical evidence to support the arguments. Findings First, this study reveals that institutional investor distraction inhibits corporate green innovation. Second, the authors also find that chief executive officer green experience and digital transformation mitigate the negative impact of institutional investor distraction on corporate green innovation. Contrary to theory, but interestingly, analyst coverage enhances the above negative relationship. Finally, the authors find that the negative impacts of positive institutional investor distraction on corporate green innovation and of institutional investor distraction on green invention innovation are stronger. Originality/value This study enables scholars to develop a more refined understanding of how institutional investors influence corporate green innovation and provides important insights for shareholders and policymakers to better promote corporate green innovation.