The impact of institutional commitments on corporate risk-taking: Evidence from the United Nations Principles for responsible investment

Abstract

Taking the institutions that signed the United Nations (UN) Principles of Responsible Investment (PRI) from 2012 to 2021 as a sample, we study whether the risk-taking of investment targets will be affected when the institutions sign the PRI. The findings demonstrate that when an institution subscribes to the PRI, it significantly decreases its investment target's degree of risk-taking. After a series of stability tests, such as surrogate variables and propensity score matching method, the main regression results in this paper remain consistent. It has been suggested through mechanism analysis that signing the PRI increases both investment efficiency and information disclosure quality thereby minimizing enterprise risk-taking behavior. Further research shows that the state-owned nature of institutions and higher media attention can reduce the risk-taking of enterprises. This paper provides a new explanatory dimension through which enterprises can reduce their level of risk-taking and offers a theoretical foundation for further expanding the impact of the PRI.