Qualified foreign institutional investors and corporate ESG performance: Evidence from China

Abstract

This study examines the impact of Qualified Foreign Institutional Investors (QFII) on corporate ESG performance to promote sustainable economic growth. An analysis of 11,175 observations from Chinese A-share listed companies in Shanghai and Shenzhen (2008–2022) reveals that QFII shareholding significantly enhances corporate ESG performance through the mechanisms of long-term corporate value realization and external supervision. Stable QFII shareholding and those with superior institutional governance quality are more likely to enhance corporate ESG performance. Furthermore, this positive influence is particularly pronounced in non-SOEs and high-tech enterprises. Finally, we found that QFII shareholding leads to better performance in the environmental, product, and corporate governance aspects of corporate ESG performance, while negatively affecting employee relations. Our findings remain consistent across different ESG performance indicators, sample selections, robust standard error adjustments, and controls for endogeneity.