INVESTOR HOLDINGS AND SUSTAINABLE FINANCE PRACTICES IN INDIAN FIRMS
INVESTOR HOLDINGS AND SUSTAINABLE FINANCE PRACTICES IN INDIAN FIRMS

Summary/Abstract: This study explores the relationships between investor holdings, financial performance, and sustainable finance practices in Indian firms listed on the MSCI ESG index. Specifically, it examines the mediating role of Investor Perception by using the price-to-book (PB) ratio between return on assets (ROA) and CSR fund allocation, as well as climate-linked loans and bonds issued. Furthermore, the study investigates the moderating effects of a foreign institutional investor (FII) and domestic institutional investor (DII) holdings on these relationships. The research is grounded in the Resource-Based View, Stakeholder, Contingency, and Ambidexterity theories. A sample of 113 companies from the MSCI ESG index of India was analyzed using linear regression moderation and mediation, with market capitalization and firm age as control variables. The results indicate that the PB ratio significantly mediates the relationship between ROA and CSR fund allocation. The percentage of FII and DII holdings moderates the relationships between the PB ratio, CSR fund allocation, and climate-linked financing. The findings contribute to the existing literature on investor holdings and sustainable finance practices, offering valuable insights for managers, investors, and policymakers seeking to promote environmentally responsible practices and enhance financial performance. The study highlights the importance of aligning financial performance with sustainable finance practices and the role of institutional investors in shaping corporate sustainability initiatives.

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