Bridging managerial actions and institutional expectations: strategies for effective sustainability assurance

Purpose This study aims to explore how institutional investors, categorized into long-term and short-term investors, and managerial engagement influence sustainability assurance, proxied by environmental, social and governance (ESG) ratings. Design/methodology/approach Using a decade of panel data (2013–2022) from China’s A-share market, the study employs fixed-effects models and robustness checks with Bloomberg ESG ratings to validate findings. Firm characteristic and sectoral heterogeneity are also analyzed to assess differences across state-owned enterprises (SOEs) and pollution-intensive industries. Findings The results show that long-term institutional investors significantly promote sustainability assurance, focusing on sustainable value creation. In contrast, short-term investors often prioritize immediate returns, leading to conflicting pressures on ESG performance. Managerial engagement, measured by managerial shareholdings, strengthens the positive effects of long-term investors and mitigates the adverse impacts of short-term pressures. These dynamics are more pronounced in non-SOEs and pollution-intensive sectors, highlighting the need for tailored strategies. Originality/value This research bridges stakeholder and agency theories, offering new insights into how different institutional investors and managerial engagement collaboratively influence corporate sustainability assurance. It also provides actionable strategies for aligning investor expectations and enhancing governance practices to drive long-term value creation, particularly in high-impact industries.