Abstract
Since the financial crisis of 2008–2009, nonfinancial-related shareholder activism increased, as public interest entities (PIEs) should strengthen their environmental, social, and governance (ESG) activities. This study aims to determine whether institutional ownership (IO) impacts ESG performance and disclosure and vice versa. Moreover, IO’s moderating and mediating influence on the relationship between ESG and firms’ financial consequences is included. This is the first literature review focusing on IO and ESG, describing IO as independent, dependent, moderator, and mediator variable. A structured literature review with 81 empirical-quantitative (archival) studies on that topic is presented based on an agency theoretical framework. Regarding the main results, long-term IO leads to increased ESG performance. Moreover, ESG performance promotes the ratio of institutional investors. Other relationships are rather heterogeneous and too low in an amount yet, stressing major research gaps.
Highlights
Institutional investor activism has become a major topic during the annual general meetings of Public Interest Entities (PIEs) (Dangaard, 2019; Villalonga, 2018)
This study aims to determine whether institutional ownership (IO) impacts ESG performance and disclosure and vice versa
While prior empirical research stressed the heterogeneity of IO and found heterogeneous results (e.g., Faller & Knyphausen-Aufseß, 2018; Friede, 2019), there is no literature review up to now on the bi-directional relationship between institutional investors and ESG and possible moderating influences of IO
Summary
Institutional investor activism has become a major topic during the annual general meetings of Public Interest Entities (PIEs) (Dangaard, 2019; Villalonga, 2018). In contrast to prior research, a clear differentiation between IO ratio, nature, and type as main categories of institutional investors is conducted in the present literature review. Sustainable (non-financial) and long-term oriented institutional investors will include ESG issues in their decision-making in line with financial goals. As institutional investors have a main focus on In this literature review, different IO nature financial results and investment risks, socially proxies are recognized to analyze whether inresponsible investors (SRI) and long-term inves- stitutional investors demand a high ESG pertors as special IO nature, explicitly consider ESG formance and disclosure. Responsible investors possess ratio, nature, and type have an impact on ESG a homogeneous set of ethical values, according to performance and disclosure. Note: * some studies include more than one IO variable and regression model
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