Insurance Institutional Investors and Corporate ESG Performance: Evidence from China

Abstract

Abstract: ESG investment is a mainstream strategy for institutional investors. Nevertheless, whether institutional investors can improve corporate ESG performance has not been unanimously answered. Using a sample of Chinese A-share listed firms from 2009 to 2021, this paper investigatesthe effect of insurance institutional investors on corporate ESG performance, and finds that insurance institutional investors significantly improve firms’ ESG performance. The results still hold after controlling for potential endogeneity. Mechanism tests show that insurance institutional investors improve firms’ ESG performance by playing a governance role. This effect is more pronounced when a firm faces severer financial constraints, when other institutional investors of the firm have greater power, and when the firm is located in an area with a better legal environment. Additional analysis on investor characteristics shows that state-owned and large insurance institutional investors are more likely to improve firms’ ESG performance, whereas foreign insurance institutional investors have no significant impact on firms’ ESG performance. Overall, the finding reveals the impact of institutional investors on corporate ESG performance from a new perspective, enriches the research on insurance institutional investors and capital market, and provides a reference for Chinese regulatory authorities to improve the supervision policy for insurance capital and promote firms’ transformation to sustainable development.

Key words: institutional investors, insurance company, ESG performance, corporate governance

Wei Wei. Insurance Institutional Investors and Corporate ESG Performance: Evidence from China[J]. Management Review, 2025, 37(12): 79-91.

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