Purpose Using data gathered on Standard & Poor’s 500-listed companies between 2012 and 2023, this paper aims to examine the effect of institutional ownership on the overall environmental, social and governance (ESG) score, as well as on the E, S and G disclosure scores separately. It also compares disclosure processes within industries, with and without emissions and examines the role of board composition in mediating the relationship. Design/methodology/approach A fixed-effects panel-data regression model is used to examine how institutional ownership affects ESG disclosure. Various versions of this model are used to understand if institutional ownership affects E, S and G disclosure scores differentially. Findings Institutional investors significantly influence overall ESG disclosure in sectors that are highly visible or subject to regulatory and societal scrutiny, such as utilities, consumer staples and industrials. The impact of institutional holding is more significant for governance disclosure than for environmental and social disclosures. The authors also highlight the positive impact of female board members on overall ESG disclosure, and E, S and G disclosures in the US majority stock sectors. Practical implications This study bridges finance, sustainability and governance, offering insights into how institutional investors influence ESG disclosure across industries. It highlights the need for proactive ESG reporting across the industrial, utilities and consumer goods sectors to align with investor expectations, emphasizes the strategic role of board gender diversity and advises balancing financial goals with ESG transparency in less regulated sectors to mitigate reputational risks. Originality/value Much of the current literature on the role of institutional investors in ESG performance has been centered on their ability to enhance a firm’s ESG performance. Specifically, contemporary literature addresses their role in environmental performance, but studies are scarce on their role in governance, social and overall ESG performance. Existing research has not sufficiently explored how institutional ownership affects the quality of ESG reporting across all three pillars. Only a limited number of studies analyze the E, S and G factors together to identify which dimension benefits most from institutional shareholding. In line with this, the study uniquely examines how institutional ownership affects overall ESG reporting quality and analyzes the individual contributions of the E, S and G factors to identify which dimension is most influenced by institutional holdings.
Pathak et al. (Wed,) studied this question.