Does institutional investor activism improve ESG performance?

This study examines the relationship between institutional investor activism and Environmental, Social, and Governance (ESG) performance among publicly listed firms in Nigeria. Using panel data from 152 firms over the period 2015-2024, we investigate whether engagement intensity by institutional investors translates into improved ESG outcomes. Employing fixed effects panel regression models with robust standard errors, our findings reveal a statistically significant positive relationship between institutional investor activism and ESG performance, after controlling for firm-specific, governance-related, and macroeconomic factors. The results suggest that active institutional investors serve as catalysts for enhanced corporate sustainability practices in emerging markets. This study contributes to the growing literature on responsible investing in developing economies and provides empirical evidence supporting stakeholder theory and agency theory perspectives on corporate governance. The findings have important implications for policymakers, institutional investors, and corporate managers seeking to advance sustainable business practices in Nigeria and similar emerging market contexts.