Common institutional ownership and corporate green investment: Evidence from China

Abstract

Corporate green investments are fundamental to environmental governance. However, studies have mostly focused on the impact of macro factors on green investment, while neglecting micro factors. This study explores the impact of common institutional ownership on corporate green investments. An ordinary least squares model is used to analyse data from A-share listed companies in heavily polluting industries from the Shanghai and Shenzhen Stock Exchanges. The results show that the proportion of green investments in enterprises with common institutional ownership increases, on average, by 0.045%. Importantly, the larger the number of common institutional investors and the higher their shareholding is, the higher the proportion of green investment will be. Mechanism tests show that the effect of common institutional investors on green investments is more pronounced for companies that are exposed to higher environmental risks and have fewer resources to implement green investments. Furthermore, a cross-sectional analysis finds that the effects of common institutional ownership are stronger for firms in post-green credit guidelines, industries with low green investments, and state-owned enterprises. Moreover, the effects are more pronounced for firms with common institutional investors who are stable and have a higher level of exit threat. Finally, common institutional ownership significantly enhances green innovation. This study advances research on the factors influencing corporate green investments and has important implications for emerging markets for enhancing corporate environmental protection and environmental governance.