Types and Styles of Institutional Investors, ESG Performance and Stock Return

This paper studies the relationship between stock return, composition of their institutional investor ownership, and ESG performance. Specifically, we followed Brian Bushee6’s way of identification to identify institutional investors into three different types (transient, dedicated, quasi-indexer), three different main investing styles (“value”, “growth”, and “growth& income”), four different specific investing styles (large value, large growth, small value, small growth), and two different tax-sensitivity styles (tax-sensitivity, tax insensitivity). We then explored whether and to what extend ESG Performance has different impact on stock return for these different types and styles of institutional investors. Our results suggest that different types and styles of institutional investors are attracted to greater ESG Performance differently, which has different net impact on stock return.