Influence of ESG Performance on Fund's Propensity to Hold Shares -Empirical Evidence from China's A-share Listed Enterprises

Abstract

With the prevalence of the ESG investment concept in China, the scale of ESG investment continues to grow. Taking A-share listed firms as the study sample, this research study empirically investigates the influence and mechanism of corporate ESG performance on the tendency of fund shareholding. The study findings indicate that corporations with better ESG performances are more inclined to attract funds to hold shares. Further, the impact mechanism analysis shows that ESG affects fund ownership mainly through two paths: reducing the risk of stock price collapse and improving the financial performance of enterprises. Further research finds that ESG performance exerts a stronger impact on increasing fund ownership in non-SOE firms than in state-owned firms. Also, firms with sound ESG performance are more inclined to pay cash dividends to return to shareholders. The extended study finds that the effect of ESG on fund shareholding behavior is mainly due to the enhancing effect of three dimensions: management practices, environmental dimension, and social dimension. The conclusion remains unchanged after passing tests such as endogeneity. This research extends a theoretical reference for comprehending the role of ESG in the capital market.