Eyes on the Ground: Can Institutional Investor Site Visits Discipline Corporate ESG Hypocrisy?

ABSTRACT

This paper investigates whether institutional investor site visits serve as an effective external governance mechanism for curbing environmental, social and governance (ESG) hypocrisy. Using panel data on Chinese A‐share listed firms from 2012 to 2021, we find that site visits significantly reduce ESG hypocrisy by improving internal control quality and alleviating financing constraints. This disciplinary effect is strengthened by investment–financing maturity mismatch and analyst coverage. Heterogeneity analyses further show that the effect is more pronounced when firms are visited by independent institutional investors, operate in regions with stronger investor protection, belong to less competitive industries, are non‐state‐owned and do not experience executive turnover. These findings highlight the governance role of on‐site external oversight in mitigating less visible strategic behaviours such as ESG hypocrisy.