Shareholders' environmental profile and its impact on firm's environmental proactivity: An institutional approach

Theorists and practitioners still argue about different shareholders' environmental preferences. Drawing on various processes of institutional theory such as deinstitutionalization and defensive institutionalism, we test the differences between foreign and national shareholders' influences on firms' environmental proactivity. Specifically, we focus on the country of origin of the dominant shareholders and the environmental culture of the countries of origin of the shareholders. Using unbalanced panel data from between 2006 and 2017, which includes 12,527 observations of 1532 different firms from 11 economic sectors and across 23 countries, our results show that foreign shareholders are more prone to modifying existing environmental practices, whereas national shareholders may accept them, despite being reluctant to implement such changes. We make a contribution by showing that the deinstitutionalization forces coming from foreign shareholders are stronger than the defensive institutionalism efforts of national shareholders. However, such forces are not always the best options for sustainability.