Research on the Effect of Common Institutional Ownership on Corporate Environmental Responsibility Disclosure: A Performance Feedback Perspective

The rise of common institutional ownership has a profound impact on corporate environmental policies, and the business environment in which the enterprises operate can significantly affect the decisions of institutional investors. This study evaluates the effect of common institutional ownership on corporate environmental responsibility disclosure (CERD) practices in Chinese manufacturing firms from the performance feedback perspective. Utilizing a sample period spanning from 2008 to 2021, the study indicates several key findings. Firstly, the presence of common institutional ownership is demonstrated to enhance the level of CERD in these firms, especially soft information on environmental responsibility. Secondly, this positive effect is amplified when positive performance expectation gaps exist. Mechanism tests reveal that under the dual pressures of common institutional investor exit threats and a negative expected performance gap, firms tend to lower their level of CERD. Conversely, synergistic effects effectively promote this disclosure. Furthermore, analysis of the impact pathway demonstrates that under such conditions, common institutional ownership exerts pressure to reduce both monetary and non-monetary private benefits accruing to management, thereby leading to optimized CERD. In addition, heterogeneity analysis indicates a more significant effect of common institutional ownership on CERD enhancement in private enterprises compared to their state-owned counterparts, particularly when positive performance expectation gaps are present.