The impact of shareholder activism on ESG: a study of industry risk as a moderating factor

This study examines the relationship between shareholder activism and ESG performance among NIFTY 500 companies in India and investigates whether industry risk moderates this relationship. Using a balanced panel of 470 firms over 2018–2024, the study employs Fixed Effects and System GMM estimations to address firm-specific heterogeneity and potential endogeneity. Shareholder activism is measured using a composite index based on proposal intensity, voting dissent, and rejection rates, while ESG performance is measured using standardized information from Refinitiv, MSCI, and BRSR disclosures. The findings indicate that shareholder activism is positively associated with ESG performance. The Fixed Effects estimate shows that a one-unit increase in activism is associated with a 1.45-point increase in ESG performance, while the System GMM estimate remains positive and significant. Industry risk significantly strengthens this relationship, with the effect being stronger in high-risk industries. Robustness tests using alternative ESG measures, activism proxies, ownership subsamples, reverse-causality tests, and pre- and post-BRSR comparisons produce consistent results. The findings highlight shareholder activism as an important external governance mechanism for strengthening ESG performance, particularly in high-risk industries.