Green Institutional Investors and Corporate Environmental Violations: Evidence from China

Abstract

The existing literature has extensively examined the influences of governments, media, the public, financial institutions, and executives on corporate environmental violations, yet the role of investors remains underexplored. This study introduces the perspective of green institutional investors to investigate how they affect corporate environmental violations. The results show that such investors significantly curb environmental violations by strengthening environmental oversight and alleviating financing constraints. Furthermore, cross-sectional evidence reveals that this inhibitory effect is more pronounced in settings with weaker government, media, and public environmental attention, underdeveloped green credit systems, and limited executive green experience. Additional analysis of economic consequences indicates that such investors help mitigate both operational and financial risks by reducing environmental violations. Finally, evidence of spillover effects confirms that this inhibitory effect extends to both industry and regional levels. Overall, this study highlights the vital role of investors in deterring corporate environmental misconduct.