Exploring the Relationship Between ESG Performance and Institutional Ownership: Evidence from Poland
Purpose: This study aims to investigate the relationship between Environmental, Social, and Governance (ESG) performance and institutional ownership among companies listed on the Warsaw Stock Exchange (WSE). Design/Methodology/Approach: Utilizing a fixed-effects regression model, the analysis examines the impact of ESG scores on the number of institutional investors. The dataset comprises 37 publicly listed companies over the period from 2018 to 2021, with a focus on the individual contributions of environmental, social, and governance scores to institutional ownership dynamics. Findings: The results reveal a nuanced relationship between ESG performance and institutional investor behaviour. Specifically, a higher Environmental Score is associated with a decrease in institutional investors, suggesting that investors may perceive enhanced environmental commitments as potential risks. Conversely, a stronger Governance Score correlates positively with institutional ownership, indicating that robust governance practices attract more institutional investors. The Social Score, however, does not show a statistically significant relationship with institutional ownership, suggesting that social factors may be less prioritized by institutional investors in this context. Practical Implications: These findings imply that institutional investors in Poland may prioritize governance over environmental and social factors when making investment decisions. This could inform corporate strategies aimed at enhancing governance practices to attract institutional investment. Originality/Value: This research contributes to the growing body of literature on ESG integration in investment strategies, particularly within the Polish market. It highlights the complexities of institutional investor preferences regarding ESG factors, providing insights that can guide both corporate governance and investment practices.