TY - JOUR
T1 - Do ESG-conscious fund managers drive green innovation? An LLM-based textual analysis of fund manager narratives
AU - Li, Yi
AU - Liu, Tong
AU - Wang, Zhaohua
N1 - Publisher Copyright:
© 2025 Elsevier B.V.
PY - 2025/5
Y1 - 2025/5
N2 - As ESG considerations gain increasing prominence, investors’ preferences for ESG factors are evolving, potentially influencing corporate governance practices. This study examines how fund managers’ ESG preferences affect the green innovation efforts of the firms they hold. Using large language models (LLMs) to analyze fund managers’ discussions in the quarterly reports of China's mutual funds, we find that firms held by fund managers with stronger ESG preferences tend to demonstrate better green innovation performance. The positive impact of ESG-conscious fund managers on green innovation is primarily driven by increased R&D expenditures, the hiring of additional R&D personnel, and the alleviation of financing constraints. Additionally, the strength of this effect varies with factors such as analyst coverage, environmental performance, corporate governance structures of the firms, and the consistency of fund managers’ ESG preferences. This research not only highlights the utility of LLMs in corporate finance studies but also offers valuable insights into the role of fund managers’ personal preferences in shaping corporate governance and innovation strategies.
AB - As ESG considerations gain increasing prominence, investors’ preferences for ESG factors are evolving, potentially influencing corporate governance practices. This study examines how fund managers’ ESG preferences affect the green innovation efforts of the firms they hold. Using large language models (LLMs) to analyze fund managers’ discussions in the quarterly reports of China's mutual funds, we find that firms held by fund managers with stronger ESG preferences tend to demonstrate better green innovation performance. The positive impact of ESG-conscious fund managers on green innovation is primarily driven by increased R&D expenditures, the hiring of additional R&D personnel, and the alleviation of financing constraints. Additionally, the strength of this effect varies with factors such as analyst coverage, environmental performance, corporate governance structures of the firms, and the consistency of fund managers’ ESG preferences. This research not only highlights the utility of LLMs in corporate finance studies but also offers valuable insights into the role of fund managers’ personal preferences in shaping corporate governance and innovation strategies.
KW - ESG Preferences
KW - Fund Managers
KW - Green Innovation
KW - Large Language Models
UR - http://www.scopus.com/inward/record.url?scp=105005850572&partnerID=8YFLogxK
U2 - 10.1016/j.ribaf.2025.102983
DO - 10.1016/j.ribaf.2025.102983
M3 - Article
AN - SCOPUS:105005850572
SN - 0275-5319
VL - 77
JO - Research in International Business and Finance
JF - Research in International Business and Finance
M1 - 102983
ER -