Research on the impact of foreign institutional investors' shareholding on the ESG performance of firms

Li Xiaochong; Wang Jing; Huang Yin; Zhang Na

doi:10.19571/j.cnki.1000-2995.2026.03.016

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Science Research Management ›› 2026, Vol. 47 ›› Issue (3) : 156-165. DOI: 10.19571/j.cnki.1000-2995.2026.03.016 CSTR: 32148.14.kygl.2026.03.016

Research on the impact of foreign institutional investors' shareholding on the ESG performance of firms

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Abstract

As the capital market is gradually opening up，foreign institutional investors will impose higher requirements for the ESG performance of firms based on the international ESG standards and shareholding preferences. However，it is still not clear whether it can be a beneficial complementary mechanism for non-rigid ESG institutional environment in China. Therefore，this paper selected Chinese A-share listed firms of Shanghai and Shenzhen Stock Exchange from 2009 to 2022 as the sample and examined the influence mechanism of foreign institutional investors' shareholding on the ESG performance of firms with the panel OLS regression with fixed-effects. The paper comprised four conclusions. Firstly，foreign institutional investors' shareholding improves the ESG performance of firms. This conclusion remains robust after the endogeneity and robustness tests. Secondly，foreign institutional investors' shareholding improves the ESG performance through reducing managerial myopia，alleviating financing constraints，and enhancing risk-taking. Thirdly，analyst following，media supervision，and government constraint further enhance the positive effect of foreign institutional investors' shareholding on the ESG performance of firms. Finally，foreign institutional investors' shareholding further promotes exploratory innovation through improving the ESG performance of firms. Considering China's non-rigid ESG institutional environment，the departments concerned should improve the mechanism of China capital market opening and fully play the collaborative promotion effect of external stakeholders including analysts，media，and government，in order to increase the positive governance effect of foreign institutional investors' shareholding on the ESG performance of firms.

Key words

foreign institutional investor / ESG performance of firms / exploratory innovation / capital market opening

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Li Xiaochong , Wang Jing , Huang Yin , et al. Research on the impact of foreign institutional investors' shareholding on the ESG performance of firms[J]. Science Research Management. 2026, 47(3): 156-165 https://doi.org/10.19571/j.cnki.1000-2995.2026.03.016

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