Institutional Investor Shareholdings and Corporate Sustainability: A Study from the Perspective of Corporate Governance

Abstract

This research analyzes how institutional investors' holdings of shares impact enterprises' sustainability-development activity as facilitated by corporate governance systems between investors and other stakeholders. Using agency theory and stakeholder theory, an analytical framework was developed by the authors to examine the various pathways that institutional investors (IIs) exercise their oversight responsibilities in addition to their strategic roles. The authors state that embedding environmental, social, and governance (ESG) measures into executive-incentive agreements can significantly improve corporate performance, and active ownership practices of IIs combined with synergy from other IIs also provide an important foundation for these measures. The researchers conclude that the construction of a governance ecosystem that is based upon long-term value is central to promoting sustainable development through institutional capital.