Institutional Investment and ESG Performance of Firms : New Evidence from Cross-Country Analyses

The current study explores the influence of institutional investors on the environmental, social, and governance ( ESG ) performance of their portfolio companies. We conduct panel fixed effect analysis on a comprehensive cross-country data set and show that institutional investment has a significant positive influence on the ESG performance of firms. Additionally, we show that organizational slack in terms of unabsorbed slack, and potential slack negatively affect ESG performance in such firms. Our results remain robust even after a series of robustness tests which include controlling for multiple firm level and macro parameters, using alternate models and addressing endogeneity concerns