Abstract
This study examines whether institutional investors promote corporate environmental performance. Specifically, we investigate how institutional investors affect a firm’s greenhouse gas (GHG) emissions. Using data on US firms’ GHG emissions over the 2002-2019 period, we find that institutional ownership is negatively related to the firm’s GHG emissions. This negative relationship persists after adjusting for endogeneity. Our results suggest that institutional investors tend to have incentives to monitor managers to reduce the firm’s GHG emissions. Overall, we contribute to the literature on corporate finance by identifying institutional investors’ role in enhancing the corporate environmental performance.
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