Institutional investors and corporate green innovation: Evidence from China

Abstract

Using data for manufacturing firms listed on China A‐share markets between 2003 and 2018, this research explores the impact of institutional investors on corporate green innovation. The study finds that pressure‐resistant institutional investors (PR investors) positively contribute to green innovation, whereas pressure‐sensitive institutional investors (PS investors) hinder it. In addition, this study examines the moderating effect of political ties, distinguishing between ascribed and achieved ties. Ascribed ties weaken the positive relationship between PR investors and green innovation, whereas achieved ties strengthen it and weaken the negative association between PS investors and green innovation. Moreover, the study investigates the influence of institutional development on the relationship between institutional investors and green innovation, and finds that managerial myopia is the mechanism through which institutional investors influence green innovation. Furthermore, this study reveals that there are heterogeneity effects among small and large firms, polluting and non‐polluting firms, and firms facing different levels of market competition. Overall, the study sheds new light on how institutional investors, acting as ‘invisible hands’, interact with political ties, acting as ‘visible hands’, to impact green innovation in transition economies.

Does Investor Sentiment Drive Corporate Green Innovation: Evidence from China

“…Finally, this work overlooked the heterogeneity of institutional investors. Since the proportion of institutional investors who are resistant to pressure is much higher than that of their counterparts who are vulnerable to pressure, we did not make a distinction between them in our empirical study [69]. Future research could distinguish between them.…”

“…Institutional investors' impact on corporate green innovation is subject to variation, as evidenced by recent scholarly investigations. A distinctive subset of these investors-characterized by their fortitude against external pressures-exerts a particularly pronounced and positive effect on fostering green innovation within firms [69]. It is worth emphasizing that this resilient group represents a significantly larger share of the institutional investor population compared to those who exhibit heightened sensitivity to pressures [69].…”

“…A distinctive subset of these investors-characterized by their fortitude against external pressures-exerts a particularly pronounced and positive effect on fostering green innovation within firms [69]. It is worth emphasizing that this resilient group represents a significantly larger share of the institutional investor population compared to those who exhibit heightened sensitivity to pressures [69]. Therefore, it stands to reason that corporations boasting a greater institutional shareholder presence would likely align their strategies to accommodate these influential stakeholders, ultimately driving a more robust and diversified agenda of green innovation initiatives.…”

“…Third, prior research has examined state ownership [40] and corporate external governance methods [69,70]. We further incorporate these factors-based on previously published research-into the framework for studying the relationship between investor sentiment and firm green innovation.…”