Abstract This study examines the relationship between institutional cross-ownership and ESG decoupling. Based on a dataset of 3,955 firm-year observations for S&P 500 firms for the period 2010–2022, we find a negatively significant association between institutional cross-ownership and ESG decoupling. Additional analyses on institutional cross-owner characteristics reveal that our findings are driven mainly by institutional cross-owners with long-term investment horizons. Besides, subsample analyses reveal that the negative impact manifests more in companies with lower board co-option, shorter CEO career horizon, and those that are non-controversial. Furthermore, we document that both the monitoring and financing advantages channels explain institutional cross-ownership’s negative influence on ESG decoupling. The baseline results are robust to a battery of robustness checks and endogeneity tests. Collectively, this study provides insightful theoretical and policy implications for the field of institutional ownership and ESG.
Khalifa et al. (Mon,) studied this question.