Institutional ownership heterogeneity and ESG performance: Evidence from China

This paper examines whether institutional investors affect the environment, social, and gover-nance (ESG) performance of Chinese-listed companies. We show that institutional ownership is significantly and positively related to corporate ESG performance. We further classify institu-tional investors into four different types, based on investment horizons and business relationships, and find that the positive relationship between institutional ownership and ESG performance is mainly driven by long-term pressure-insensitive institutional investors and short-term pressure -sensitive institutional investors. Further evidence suggests that such an association is especially evident among firms in regions with high levels of economic development and marketization.