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Do firms listen to the ESG voices of minority investors? Evidence from China

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  • Luo, Runmei
  • Ye, Yong

Abstract

This study examines whether and how the expression of ESG(Environmental, Social, and Governance) concerns by minority investors in their communication with firms affects firms' ESG performance. We employ the bidirectional encoder representation from transformer (BERT) model to identify ESG statements in questions asked by minority investors and construct sentence-level ESG concern indicators. The findings indicate that the more ESG-related questions investors ask in their interactions with firms, the better the firms' future ESG performance. This effect is more pronounced when investors' ESG-related questions are more negative, when managers show greater willingness to learn from investor interactions, when listed firms emphasize investor relations management, and when listed firms are held by ESG funds. Additional analyses reveal that pressure from the market and regulation may explain why listed companies listen to the ESG voice of minority investors. In addition, we find that minority investor voices do not lead to opportunistic greenwashing when driving improvements in firms' ESG performance. Overall, our findings suggest that minority investors promote corporate sustainability through active voice.

Suggested Citation

  • Luo, Runmei & Ye, Yong, 2024. "Do firms listen to the ESG voices of minority investors? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 96(PA).
  • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924004940
    DOI: 10.1016/j.irfa.2024.103562
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    More about this item

    Keywords

    BERT model; Minority investor voice; Investor-firm communication; ESG concern; ESG performance;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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