The Moderating Role of Long-term Institutional Investors on Environmentally Friendly Management

Abstract

This paper explores the behavior of organizations in adopting environmentally friendly management. Institutional theory tried to explain the isomorphic behavior of firms operating in various organizational fields by examining the institutional pressures imposed upon them. While their findings are consistent in that firms operating in different institutional context show differing behavior due to dissimilar levels of institutional pressures, they fail to explain the heterogeneous firm behavior within the same institutional context. In order to bridge this gap, a few studies have considered the moderating role of organizational characteristics in firms norm-conforming behavior. I empirically test the effects of both institutional pressures and organizational characteristics of 139 firms by observing industrys institutional pressures and firms ownership structure to see their influence on firms adoption of environmentally friendly management. The findings suggest that the impact of institutional pressures on firms behavior of adopting environmentally friendly management is negatively moderated by greater long-term institutional investor holdings of a firm.