Do green institutional investors promote environmental responsibility? Evidence from China’s manufacturing sector

This study investigates whether green institutional investors on corporate environmental responsibility (CER) in Chinese manufacturing firms and explores the underlying mechanisms driving this relationship. In recent years, there has been a noticeable increase in the presence of institutional investors committed to carbon reduction, pollution mitigation, and sustainable practices. However, existing literature has largely overlooked the unique governance role of green-oriented institutional investors in promoting CER. Specifically, few studies empirically test whether green institutional investors significantly enhance CER, and the mechanisms remain under-explored. To address these gaps, this research analyzes the impact of green institutional investors on CER in China’s manufacturing sector. The key findings are as follows. First, green institutional investors demonstrate a substantially stronger positive influence on CER. Second, short-term green institutional investors only improve environmental disclosure practices without significantly affecting environmental performance scores. Third, beyond alleviating financing constraints, green institutional investors enhance CER by promoting comprehensive environmental information disclosure. Finally, their influence proves more pronounced in private firms and firms in heavily polluting industries.