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Common institutional ownership and corporate green investment: Evidence from China

Author

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  • Lu, Chao
  • Zhu, Tianqi
  • Xia, Xiaoxue
  • Zhao, Ziying
  • Zhao, Yiwen

Abstract

Corporate green investments are fundamental to environmental governance. However, studies have mostly focused on the impact of macro factors on green investment, while neglecting micro factors. This study explores the impact of common institutional ownership on corporate green investments. An ordinary least squares model is used to analyse data from A-share listed companies in heavily polluting industries from the Shanghai and Shenzhen Stock Exchanges. The results show that the proportion of green investments in enterprises with common institutional ownership increases, on average, by 0.045%. Importantly, the larger the number of common institutional investors and the higher their shareholding is, the higher the proportion of green investment will be. Mechanism tests show that the effect of common institutional investors on green investments is more pronounced for companies that are exposed to higher environmental risks and have fewer resources to implement green investments. Furthermore, a cross-sectional analysis finds that the effects of common institutional ownership are stronger for firms in post-green credit guidelines, industries with low green investments, and state-owned enterprises. Moreover, the effects are more pronounced for firms with common institutional investors who are stable and have a higher level of exit threat. Finally, common institutional ownership significantly enhances green innovation. This study advances research on the factors influencing corporate green investments and has important implications for emerging markets for enhancing corporate environmental protection and environmental governance.

Suggested Citation

  • Lu, Chao & Zhu, Tianqi & Xia, Xiaoxue & Zhao, Ziying & Zhao, Yiwen, 2024. "Common institutional ownership and corporate green investment: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 1123-1149.
    • Handle: RePEc:eee:reveco:v:91:y:2024:i:c:p:1123-1149
    DOI: 10.1016/j.iref.2024.01.072
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    2. Zhang, Han & Li, Minghui & Yang, Yujie, 2024. "Does common institutional ownership constrain related party transactions? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 1015-1042.

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    More about this item

    Keywords

    Common institutional ownership; Corporate green investment; Environmental governance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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