Do Firms Respond to Calls for Environmental Improvements made by Retail Investors?

49 Pages Posted: 7 May 2024

See all articles by T.J. Wong

T.J. Wong

University of Sothern California

Gwen Yu

University of Michigan

Shubo Zhang

Shanghai Jiao Tong University

Tianyu Zhang

The Chinese University of Hong Kong (CUHK)

Date Written: May 3, 2024

Abstract

Retail investors have become more vocal in pressuring firms to improve their environmental performance, yet little is known about whether and when firms respond to these pressures. We conduct a field experiment on investor online platforms where we inject investor pressure by posting requests for environmental improvement among firms found in violation of pollution standards in China. We find that retail investor pressure can reduce the likelihood of subsequent violations by 4.2%. Amplifying the publicity of the appeal through social media leads to the greatest reduction in subsequent violations, but calling for more disclosure has no incremental effect on violation rates. We find significant within-firm spillover effects to other establishments. The findings suggest that retail investor pressure can lead to improvements in environmental performance by changing firms’ perception of investors’ demand for such performance.

Keywords: Retail investors, environmental performance, Investor Online Platforms

JEL Classification: G00, M40, M41

Suggested Citation

Wong, T.J. and Yu, Gwen and Zhang, Shubo and Zhang, Tianyu, Do Firms Respond to Calls for Environmental Improvements made by Retail Investors? (May 3, 2024). Available at SSRN: https://ssrn.com/abstract=4816139 or http://dx.doi.org/10.2139/ssrn.4816139

T.J. Wong

University of Sothern California ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Gwen Yu

University of Michigan ( email )

701 Tappan Street
R3350
Ann Arbor, MI MI 48109
United States
7347635934 (Phone)

Shubo Zhang (Contact Author)

Shanghai Jiao Tong University ( email )

1954 Huashan Road
Shanghai, Shanghai 200030
China
+86 (0)21 62932586 (Phone)

Tianyu Zhang

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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