Green Hills Beyond: Green Institutional Investors and Corporate Environmental Cost Behavior

This study examines how green institutional investors shape firms’ environmental cost behavior. We first document that environmental costs exhibit anti-stickiness, declining more during sales downturns than rising during sales upturns. This environmental cost anti-stickiness (ECAS) appears to stem from managerial myopia and earnings management incentives. We further find that green institutional investors mitigate ECAS by lowering managerial environmental opportunism, raising managers’ green awareness, and alleviating financial constraints. The effect is stronger for non-state-owned firms, firms outside heavily polluting industries, and firms located in areas with weaker government environmental attention. Overall, our findings reveal that green institutional investors meaningfully shape firms’ environmental cost decisions and responsibility fulfillment.