Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Influence of distracted mutual fund investors on corporate ESG decoupling: evidence from China

Influence of distracted mutual fund investors on corporate ESG decoupling: evidence from China This study aims to explore whether investors’ inattention is associated with firms’ environmental, social and governance (ESG) decoupling, which is defined as the misalignment between the implementation and incorporation of ESG policies.Design/methodology/approachFocusing on a sample of the components of ESG ratings for China Securities Index (CSI) 300 companies between 2017 and 2019, the authors test the relationship between firms’ ESG decoupling level and mutual fund investors’ distraction by applying exogenous shocks to their portfolios.FindingsThe results show that firms with distracted mutual fund investors engage in more external than internal ESG actions, leading to a high ESG decoupling level. Mutual fund investors use “threat of exit” rather than “voice” as a governance mechanism to influence corporate ESG decoupling. While external ESG actions mitigate stock price crash risk, internal ESG actions increase firm value; firms with a high ESG decoupling level suffer lower valuations.Practical implicationsThis study has implications for increasing the congruence between firms’ external and internal ESG actions, thereby improving firms’ ESG performance and long-term economic outcomes.Social implicationsThis paper helps policy-makers and regulators to reassess how ESG policies can be implemented to be consistent with organizations’ core business activities.Originality/valueContributing to prior studies of greenwashing and corporate social responsibility decoupling, this paper extends decoupling literature by revisiting ESG impacts in an integrated framework and explores the antecedents of corporate ESG decoupling from the perspective of institutional investor monitoring. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Sustainability Accounting Management and Policy Journal Emerald Publishing

Influence of distracted mutual fund investors on corporate ESG decoupling: evidence from China

Loading next page...
 
/lp/emerald-publishing/influence-of-distracted-mutual-fund-investors-on-corporate-esg-4dRlM400Gz

References (115)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2040-8021
eISSN
2040-8021
DOI
10.1108/sampj-10-2021-0401
Publisher site
See Article on Publisher Site

Abstract

This study aims to explore whether investors’ inattention is associated with firms’ environmental, social and governance (ESG) decoupling, which is defined as the misalignment between the implementation and incorporation of ESG policies.Design/methodology/approachFocusing on a sample of the components of ESG ratings for China Securities Index (CSI) 300 companies between 2017 and 2019, the authors test the relationship between firms’ ESG decoupling level and mutual fund investors’ distraction by applying exogenous shocks to their portfolios.FindingsThe results show that firms with distracted mutual fund investors engage in more external than internal ESG actions, leading to a high ESG decoupling level. Mutual fund investors use “threat of exit” rather than “voice” as a governance mechanism to influence corporate ESG decoupling. While external ESG actions mitigate stock price crash risk, internal ESG actions increase firm value; firms with a high ESG decoupling level suffer lower valuations.Practical implicationsThis study has implications for increasing the congruence between firms’ external and internal ESG actions, thereby improving firms’ ESG performance and long-term economic outcomes.Social implicationsThis paper helps policy-makers and regulators to reassess how ESG policies can be implemented to be consistent with organizations’ core business activities.Originality/valueContributing to prior studies of greenwashing and corporate social responsibility decoupling, this paper extends decoupling literature by revisiting ESG impacts in an integrated framework and explores the antecedents of corporate ESG decoupling from the perspective of institutional investor monitoring.

Journal

Sustainability Accounting Management and Policy JournalEmerald Publishing

Published: Jan 26, 2023

Keywords: Emerging markets; Natural language processing; ESG decoupling; Mutual fund distraction

There are no references for this article.