Quantity or quality: how common institutional investors with green experience shape corporate green innovation

Corporate green innovation is constrained not only by financial constraints but also by deficiencies in green governance capabilities. Exploiting the initial entry of common institutional investors with green experience as a quasi-natural experiment, this study employs a staggered difference-in-differences (DID) model to examine its effect on corporate green innovation using data from Chinese A-share listed firms during 2010–2023. The results show that common institutional investors with green experience significantly enhance both the quantity and the quality of corporate green innovation. These findings remain robust after a series of endogeneity and robustness checks. Mechanism analysis reveals that such investors promote green innovation through two main channels: mitigating managerial myopia and reducing green agency costs. Heterogeneity analyses further reveal that the positive effect is more pronounced in regions with weaker environmental regulation and in firms whose executives exhibit stronger green awareness. Additional analyses indicate that common institutional investors with green experience also significantly enhance firms’ ESG performance, while command-and-control environmental regulation further strengthens these effects. This study contributes novel theoretical insights and empirical evidence on how green finance facilitates corporate green transformation through specialised investor governance channels, offering important policy implications for emerging economies seeking to promote green innovation.