Institutional Investors' Green Activism and Corporate Green Innovation: Based on the Behind-Scene Communications

This paper investigates the promotion effects of institutional investors' communication on corporate green innovation. We use content analysis to identify the efficiency of institutional investors' communication, and find that institutional investors' communication promotes corporate green innovation. The mechanism analysis indicates that institutional investors' communication improves managers' awareness of green transformation, promotes corporate green investment efficiency and mitigates the extent of greenwashing. The positive impacts of institutional investors' communication are more effective on corporate utility patents than on invention patents. Such green governance effects are more pronounced in non-state-owned firms, green investors and close-distance to the institutional investors. By introducing exogenous shocks of the New Environmental Protection Law and China's regional carbon emissions trading market pilots, we find that the impact of institutional investors' communication on green innovation is enhanced after the implementation of environmental policies. Overall, our research contributes to the existing literature on institutional investors' green activism and the factors of green innovation, and also enriches the cross-disciplinary research on environmental regulation affecting institutional investors' green governance.