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| Do Institutional Investors Care Firm Environmental Performance? Evidence from the Most Polluting Chinese Listed Firms |
| LI Wenjing, LU Xiaoyan
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School of Management, Jinan University;
Business School, Sun Yat-sen University |
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Abstract We find that firm environmental performance positively affects institutional shareholding, the shareholding of long-term institutions in particular. However, no such correlation is found for the shareholding of short-term institutions. Results of this study indicate that the better the firm environmental performance, the higher the abnormal returns, suggesting that institutions investing in firms with better environmental performance earn higher stock returns. Further analysis illustrates that firms with better environmental performance easily access to bank loans, enjoy lower loan costs and obtain higher tax benefit. Our findings indicate that the government encourages firms to enhance their environmental performance, and in return, provides more favorable lending terms and more tax benefits, leading to long-term firm value enhancement. Such findings only exist in state-owned firms.
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Received: 20 October 2013
Published: 19 April 2018
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