Do firms respond to calls for environmental improvements made by retail investors?

Retail investors have become more vocal in pressuring firms to improve their environmental performance, yet little is known about whether and when firms respond to these pressures. We conduct a field experiment on investor online platforms where we inject investor pressure by posting requests for environmental improvement among firms found in violation of pollution standards in China. We find that retail investor pressure can reduce subsequent violations by 4.2%. Amplifying the publicity of the appeal through social media leads to the greatest reduction in subsequent violations, but calling for more disclosure has no incremental effect on violation rates. We find significant within-firm spillover effects to other establishments and to other pollutant sources. The findings suggest that retail investor pressure can lead to improvements in environmental performance by changing firms’ perception of investors’ demand for such performance.