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2025, Volume 7, Issue 2: 363-380. doi: 10.3934/GF.2025013
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Research article

Does ESG performance inhibit or promote herding behavior of institutional investors?

  • 1.
    School of Management, Guangzhou University, Guangdong 510006, P.R. China
  • 2.
    School of Management, Shanghai University, Shanghai, 200444, P.R. China
  • 3.
    Faculty of Business and Management, Beijing Normal-Hong Kong Baptist University, Zhuhai, 519087, P.R. China
  • 4.
    Bauer College of Business, University of Houston, Houston, Texas 77204, USA
  • Received: 04 March 2025 Revised: 20 May 2025 Accepted: 20 May 2025 Published: 28 May 2025

  • JEL Codes: Q01, G23

  • In recent years, environmental, social, and governance (ESG) issues have attracted much attention in the capital market. As the herding behavior of institutional investors is a prominent phenomenon in the capital market, it is of great value to explore how firms' ESG performance affects herding. Using A-share listed firms in China from 2009 to 2023 as a sample, we found that good ESG performance can inhibit herding. Moreover, the inhibitory effect is very pronounced for firms with low analyst attention and firms that do not hire a top-ten domestic audit firm, and this inhibitory effect is mainly driven by social responsibility (S dimension) and governance (G dimension) We also found that ESG performance can improve the price efficiency of the capital market. Our study expands the literature on the economic consequences of firms' ESG performance in terms of herding behavior of institutional investors.

    Citation: Rongwu Zhang, Huaqian Chen, Wenjia Zhang, Tong Lu. Does ESG performance inhibit or promote herding behavior of institutional investors?[J]. Green Finance, 2025, 7(2): 363-380. doi: 10.3934/GF.2025013

    Related Papers:

  • In recent years, environmental, social, and governance (ESG) issues have attracted much attention in the capital market. As the herding behavior of institutional investors is a prominent phenomenon in the capital market, it is of great value to explore how firms' ESG performance affects herding. Using A-share listed firms in China from 2009 to 2023 as a sample, we found that good ESG performance can inhibit herding. Moreover, the inhibitory effect is very pronounced for firms with low analyst attention and firms that do not hire a top-ten domestic audit firm, and this inhibitory effect is mainly driven by social responsibility (S dimension) and governance (G dimension) We also found that ESG performance can improve the price efficiency of the capital market. Our study expands the literature on the economic consequences of firms' ESG performance in terms of herding behavior of institutional investors.



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