Impact of institutional ownership heterogeneity on sustainability spending of portfolio firms: The moderating role of credit rating

The present study examines the influence of institutional owners on the sustainability spending of portfolio firms, considering dissimilarities in investment horizons and changes in the credit rating. Using a data set comprising 24,822 observations from 2,804 Indian firms over a twenty-two-year period (2000 to 2021), hypotheses grounded in agency and institutional theories are tested. The study reveals that firms with domestic institutional investors (DIIs) allocate greater resources to sustainability compared to those with foreign institutional investors (FIIs), attributed to differences in their investment horizons and governance practices, which play a role in resisting isomorphic pressures to enhance credit ratings.