Do firms listen to the ESG voices of minority investors? Evidence from China

This study examines whether and how the expression of ESG(Environmental, Social, and Governance) concerns by minority investors in their communication with firms affects firms' ESG performance. We employ the bidirectional encoder representation from transformer (BERT) model to identify ESG statements in questions asked by minority investors and construct sentence-level ESG concern indicators. The findings indicate that the more ESG-related questions investors ask in their interactions with firms, the better the firms' future ESG performance. This effect is more pronounced when investors' ESG-related questions are more negative, when managers show greater willingness to learn from investor interactions, when listed firms emphasize investor relations management, and when listed firms are held by ESG funds. Additional analyses reveal that pressure from the market and regulation may explain why listed companies listen to the ESG voice of minority investors. In addition, we find that minority investor voices do not lead to opportunistic greenwashing when driving improvements in firms' ESG performance. Overall, our findings suggest that minority investors promote corporate sustainability through active voice.