Institutional investors and corporate environmental and financial performance

Abstract

We propose a conceptual framework to illustrate that when three conditions hold, institutional investors moderate a positive relation between corporate financial performance and corporate environmental performance. We explore heterogeneities across institution types to demonstrate the importance of each condition. The moderating effect works through the channels of expert consulting and effective monitoring. Our results have important policy and practical implications given the global trend of ownership concentration in institutional investors and the projection that by 2025, one out of three dollars under professional management will be invested in corporate social responsibility assets.

Environmental performance and employee welfare: Evidence from health benefit costs

“…For example, profitable companies with better bargaining powers against insurers may obtain favorable premium rates and perform better in ecological issues at the same time. To mitigate the endogeneity concerns, I follow prior literature (Kim et al, 2019; Miller et al, 2022) and adopt an instrumental‐variable (IV) two‐stage least square approach.…”

Investor sentiment and the risk–return relation: A two‐in‐one approach

“…First, II measures sentiment at the aggregate level and does not distinguish institutional investor types. Ideally, we would wish to categorize institutional investor types, such as hedge funds, mutual funds, pensions, banks, insurance companies, and independent investment advisors, as sentiments across these groups might differ due to disparate trading strategies and regulatory requirements, potentially leading to differential impacts on the risk–return relation (Asness et al, 2012; Li et al, 2017; Miller et al, 2022; Pan et al, 2018; Wang & Zheng, 2022; Ward et al, 2020). For example, institutions such as banks, insurance companies, and pensions tend to avoid trading risky stocks, signifying that they may contribute less to the aggregate institutional investor sentiment, compared with mutual funds, independent advisors, and hedge funds.…”