Does institutional and foreign ownership pressure increase ESG performance? Evidence from the emerging economy

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Abstract

The aim of this study is to empirically investigate the effect of different ownership structures, specifically institutional and foreign ownership, on the environmental, social, and governance (ESG) performance of non-financial companies. By employing 203 firm-years observations between 2019 and 2023, we found two very different results. Institutional ownership exhibits a significant negative correlation with ESG performance, suggesting that its increased presence may hinder a company’s sustainability efforts. Conversely, foreign ownership demonstrates a significant positive correlation with ESG performance, indicating that greater foreign involvement tends to foster improved ESG practices. These results remained the same even when controlling for the impact of the COVID-19 pandemic and when looking only at profitable companies. Essentially, this suggests that foreign investors may push for better sustainability, while institutional ownership might prioritize other goals. This finding is helpful for investors and businesses trying to improve their social and environmental impact.

Keywords: Institutional Ownership, Foreign Ownership, ESG Performance, Indonesia

Authors’ individual contribution: Conceptualization — A.N.A.P. and Y.A.A.; Methodology — A.N.A.P. and Y.A.A.; Formal Analysis — A.N.A.P. and Y.A.A.; Investigation — A.N.A.P. and Y.A.A.; Writing — Original Draft — A.N.A.P.; Writing — Review & Editing — Y.A.A.; Supervision — Y.A.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, M14, Q56

Received: 07.10.2025
Revised: 11.01.2026; 22.01.2026
Accepted: 27.01.2026
Published online: 30.01.2026

How to cite this paper: Putri, A. N. A., & Aryani, Y. A. (2026). Does institutional and foreign ownership pressure increase ESG performance? Evidence from the emerging economy. Business Performance Review, 4(1), 56–67. https://doi.org/10.22495/bprv4i1p5