Foreign Institutional Investors and Corporate Green Innovation: Evidence from an Emerging Economy

Abstract

ABSTRACT This study investigates the impact of foreign institutional investors (FIIs) on corporate green innovation. We manually collected data on foreign institutional ownership (FIO) from 34 international jurisdictions between 2009 and 2020. We find that FIO has a positive, robust, and causal effect on the green innovation practices of Chinese listed companies. Moreover, our heterogeneity analyses indicate that this positive effect is more pronounced for FIIs originating from jurisdictions exhibiting greater environmental consciousness of and advancements in green technology as well as for those FIIs committed to the United Nations—supported Principles of Responsible Investment. Furthermore, we provide evidence suggesting that environmental information disclosure and monitoring serve as potential mechanisms through which FIIs catalyze corporate green innovation.