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

ABSTRACT

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.

KEYWORDS:

• Institutional investors’ communication
• green innovation
• investors’ green activism
• green governance

JEL:

• JEL
• C78
• G23
• G34
• O31
• O33

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Author Contributions

For research articles with several authors, their individual contributions are provided as follow: conceptualization, Y.H., Q.L.; methodology, Q.L., Y.H. and X.L.; software, Q.L., X.L.; formal analysis, Q.L., Y.H. and X.L.; investigation, Q.L., X.L.; data curation, X.L., Y.S.; writing—original draft preparation, Q.L., X.L and Y.H.; writing—review and editing, Q.L., Y.H. and X. L.; supervision, Q.L., Y.H., X. L. and Y. S.

Data availability statement

The green patent data used in this study is publicly available from Chinese Research Database Services (CNRDS). The annual reports of listed companies, site visit question-and-answer minutes, and other data on firm size that support the findings of this study are obtained from the CSMAR database at https://www.gtarsc.com/#/index.

Additional information

Funding

The authors would like to thank the General Program of National Social Science Fund of China (23BJY106); the Humanities and Social Sciences Research Planning Fund Project by Ministry of Education of China [20YJCZH040]; the Fundamental Research Funds for the Central Universities, South-Central MinZu University (CPT22009).