The Relationship Between Heterogeneous Institutional Investors’ Shareholdings and Corporate ESG Performance: Evidence From China

Institutional investors are gaining prominence in China. This study focuses on whether they can monitor corporates to better fulfill their social responsibilities. This study examines the relationship between a corporates' environmental, social, and governance (ESG) performance and the relevant institutional investors' shareholdings, indicating that such shareholdings positively affect the ESG performance of Chinese companies. Notably, pressure-resistant institutional investors have a greater impact on corporate ESG performance score than pressure-sensitive institutional investors, particularly for private enterprises and for those whose chief executive officers do not serve as general managers. Based on these results, this paper recommends that institutional investors fully account for their ESG performance and social responsibility when selecting investee companies. As such, this heightened awareness will attract more investment and facilitate company growth.