Unpacking ESG in family firms: the moderating role of institutional investors in China
Changyi Zhu, Alexandra Simón, Maria Jose ParadaPurpose
This study aims to examine how family control is associated with environmental, social and governance (ESG) performance in Chinese listed family firms (FFs) and whether institutional ownership moderates these associations. By disaggregating ESG, it clarifies where family-control logics align with, or diverge from, market-oriented ownership pressures in an emerging-market context.
Design/methodology/approach
Drawing on socioemotional wealth and institutional perspectives, the authors analyse panel data from 1,561 Chinese-listed FFs over 2009–2019. They estimate two-stage least squares (2SLS) models with firm and year fixed effects, using general manager family affiliation as a context-specific instrumental variable.
Findings
Family control is positively associated with environmental and governance performance, but not significantly associated with social performance. Institutional ownership weakens the positive associations between family control and environmental and governance outcomes, consistent with tensions between family-oriented long-term priorities and shorter-horizon market pressures. Results remain broadly consistent in the manufacturing subsample.
Research limitations/implications
The findings are based on listed Chinese FFs before COVID-19; future research could examine privately held firms and post-2019 ESG regulation.
Practical implications
The results suggest that family owners and institutional investors should use dimension-specific ESG governance rather than treating ESG as a uniform construct.
Social implications
Clearer social-performance standards may help reduce symbolic compliance and strengthen substantive ESG engagement in emerging economies.
Originality/value
The study demonstrates heterogeneous family-control associations across ESG dimensions and shows when institutional investors dampen family-driven environmental and governance engagement. It contributes by integrating socioemotional wealth and institutional perspectives and by using a context-grounded instrumental variable to address endogeneity concerns.