Multiple large shareholders and corporate Environmental, Social and Governance (ESG) controversies

Abstract

Prior literature has presented conflicting findings on the governance effects of multiple large shareholders (MLS). This study aims to address this gap by empirically examining the impact of MLS on corporate Environmental, Social, and Governance (ESG) controversies and investigating how regional marketization moderates this relationship. Using a comprehensive panel dataset of 17,164 Chinese A-share listed firms from 2018 to 2022, the study finds that the presence of MLS significantly reduces ESG controversies in listed firms. Moreover, this effect is more pronounced in firms located in regions with higher levels of marketization. These findings remain robust across various tests for endogeneity. This study enriches the literature on the role of MLS in corporate outcomes and extends agency theory by deepening the understanding of how MLS structures address principal-principal agency conflicts related to ESG issues. Furthermore, the findings underscore the need for targeted policy interventions to enhance the influence of MLS on ESG behaviors. Policymakers and regulators are encouraged to leverage these insights to bolster the sustainability of listed firms and promote the wider adoption of ESG principles both in the Chinese market and globally.