ESG Disclosure, Institutional Investor Preferences and Firm Value

Abstract

Based on stakeholder theory and signal and reputation theory etc,this paper evaluates the quality level of ESG disclosure of listed companies using Wind ESG score, and introduces the variable of institutional investors' shareholding ratio, selects 2780 listed companies from 2018-2022 as samples, analyses whether institutional investors have ESG investment preferences, and investigates the value of the quality level of ESG disclosure on the value of listed companies' impact mechanism, and further heterogeneity analysis on this basis. The empirical results show that, firstly, improving the quality of ESG information disclosure by listed enterprises in China is conducive to significantly increasing their enterprise value; secondly, institutional investors have ESG investment preferences and attach more importance to the ability of listed enterprises to develop in the long term; thirdly, the proportion of institutional investor shareholding plays a partly intermediary role in the process of the impact of ESG information disclosure quality on the value of the enterprise, i.e., listed enterprises with high-quality ESG disclosure level can attract the attention of institutional investors to the enterprise value. Third, the proportion of institutional investors' shareholding plays a partial mediating role in the process of ESG disclosure quality level affecting enterprise value, i.e., listed firms with high-quality ESG information disclosure can attract institutional investors to increase their shareholding, thus enhancing their enterprise value. Fourthly, the extent to which the quality level of ESG disclosure affects the value of listed firms varies according to the attributes of the firms: there is a significant difference between large-scale and small-scale, highly marketised and low-marketised listed firms; and there is no difference shown between state-owned and non-state-owned, light-pollution and heavy-pollution listed firms, and all of the above conclusions are robust. Accordingly, this paper puts forward recommendations to strengthen the construction of the domestic ESG disclosure and governance system, encourage listed enterprises to practice the concept of ESG responsibility, and develop medium- and long-term institutional investors, aiming to promote listed enterprises to achieve sustainable development, and thus promote the construction of the domestic ESG disclosure system.