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Power of Values-based Investors on ESG Actions of Value-orientated Managers

Author

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  • Meg Adachi-Sato

    (Research Institute for Economics & Business Administration, Kobe University, JAPAN and Faculty of Business Administration and Accountancy, Khon Kaen University, THAILAND)

Abstract

This study examines how for-profit firms obtain capital from values-based, socially responsible investors by undertaking environmental, social, and governance (ESG) actions within a search model. In this model, the two parties are matched and benefit from informational advantages throughout the search process. The paper shows that an increase in the number of socially responsible investors encourages the for-profit firms capable of taking ESG actions to consistently take such actions, even if doing so may result in negative marginal pecuniary returns. Consequently, the paper concludes that regulators aiming to encourage firms to adopt more ESG actions should incentivize investors to prioritize ESG performance in their investment decisions. It also demonstrates that strengthening shareholder rights or promoting corporate governance reforms does not necessarily motivate firms to pursue ESG actions.

Suggested Citation

  • Meg Adachi-Sato, 2025. "Power of Values-based Investors on ESG Actions of Value-orientated Managers," Discussion Paper Series DP2025-01, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2025-01
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2025-01.pdf
    File Function: First version, 2025
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Feldhütter, Peter & Halskov, Kristoffer & Krebbers, Arthur, 2024. "Pricing of sustainability-linked bonds," Journal of Financial Economics, Elsevier, vol. 162(C).
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      More about this item

      Keywords

      ESG; Search; Social impact; Socially responsible investor; Competitive capital market; Bargaining; Value versus values motivations;
      All these keywords.

      JEL classification:

      • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
      • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
      • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
      • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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