Green information disclosure and shareholding preferences of institutional investors: the case of China

Abstract Increasing social funding is essential for adapting to climate change and driving low-carbon transformation. Employing a panel two-way fixed effects model, we investigate the response of institutional investors’ shareholding preferences to the green information disclosure of held companies in the Chinese stock market. Our main regression results demonstrate that institutional investors prefer “green” investments in their shareholding behavior and place greater trust in Bloomberg ESG disclosures. In addition, green information disclosure can effectively reduce market risk, alleviate information asymmetry, and improve the performance of listed companies. Specifically, compared with the Bloomberg ESG rating, the impact of green information disclosed in the annual reports of listed companies on financial indicators is statistically more significant. Moreover, different types of institutional investors have varying shareholding preferences on the basis of the green information disclosure of invested companies. Notably, institutional investors show low levels of trust in the independent green disclosures of energy state-owned enterprises while expressing high levels of trust in ESG disclosures. Finally, we conclude with targeted policy implications to guide corporate information disclosure.