Unlocking ESG Performance: How Qualified Foreign Institutional Investors Enhance Corporate Sustainability in China’s Capital Markets

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

I have reviewed the manuscript entitled “Unlocking ESG Performance: How Qualified Foreign Institutional Investors Enhances Corporate Sustainability in China’s Capital Markets”. The manuscript is interesting and well struccherd. However, there are some concerns that need to be addressed before it can be considered for publication.

 

1. Abstract looks fine but add the most interesting findings in 1 or 2 sentences
2. The contributions are well explained
3. What ate the guarantees in general that China’s government can provide to increase the foreign investors ? Is there an specific code? Is there an specific percentage for foreign ownerships? discuss it in 1 paragraph
4. The methodology and techniques have been used are fine, however author/s did not mention if the mediations are fully or partially mediate the relationship?

 

Author Response

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Author Response File: Author Response.docx

Reviewer 2 Report

Comments and Suggestions for Authors

The first sentence in the abstract is unclear and adds no value. Please replace it with a clear explanation of the paper's motivation and aim.

The title of the second section is "Theoretical Hypothesis". Please come up with better wording. These two words do not colocate together. Or do you want to imply that your research does not have practical implications?

The methodology, results, and discussion sections are professionally written. No changes are required.

Conclusions

Please add the limitations of the study.

 

 

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Reviewer 3 Report

Comments and Suggestions for Authors

Using panel data from Chinese A share listed firms between 2009 and 2022, this study employs a two-way fixed effects model to examine the impact of QFII shareholding on corporate ESG performance and its underlying mechanisms.

The study shows what it proposes in that the abstract is fine, the introduction is clear enough and the methodology is well guided.  The analysis well explores the deductions of the study till the conclusions.

However, the study could improve on the following:

Line 183 - 448  The study excessively elaborated on the hypothesis and did not quide readers on the research question. 

Line 585 - Could you further explain how the study minimized empirical bias. 

Line 878 - Authors could further expand on the discussions post analysis in view of their contributions to the academia.

Line 875 - Following the broad methodology given, kindly provide answers to the research questions in the concluding remarks. 

Overall, the study excessively concentrated on recommendations to policy makers and could recommend on the future researches.

 

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Reviewer 4 Report

Comments and Suggestions for Authors

This is a timely and methodologically rigorous study examining QFII’s impact on corporate ESG performance in China. The paper makes significant contributions by:

(1). Disentangling environmental investment into three pathways (green innovation, investment, and expenses). (2). Revealing the substitution effect of information transparency on QFII’s governance role. (3). Provide robust empirical evidence using 14 years of panel data and address endogeneity through multiple approaches. However, revisions are required to strengthen theoretical framing, address methodological limitations, and enhance policy relevance. 1. 

• H2–H4 lack explicit theoretical anchors. Link green innovation/investment/expenses to specific theories (e.g., resource-based view for innovation, legitimacy theory for costs). Clarify why QFII’s "foreign institutional" attributes uniquely drive these mechanisms beyond domestic investors.

• H5 (Substitution Effect): Using institutional theory to reconcile the "complementary vs. substitution" duality of information transparency. Why does high transparency diminish QFII’s marginal governance impact? Elaborate on the boundary conditions.

• Measuring GE via "administrative expenses" (p. 13) is problematic. Costs like "sanitation fees" may not reflect environmental spending. Use alternative data (e.g., ecological penalty disclosures or pollution control costs in CSR reports) or validate with keyword extraction from financial notes.

• Huazheng ESG ratings are dominant but controversial. Address potential rating biases by:

  • Compared with other providers (e.g., Sino-Securities ESG).

  • Conducting robustness tests using ESG pillar scores (E/S/G separately) to reveal nuanced effects.

• The peer-based IV (industry-year QFII average) may violate the exclusion restriction if industry ESG trends confound results. Add a spatial IV (e.g., provincial QFII policy shocks) to strengthen causal claims.

• Match firms on pre-treatment ESG trends (not just levels) to rule out selection bias from parallel improvement trajectories.

• Discuss how China’s unique institutional landscape (e.g., state-owned enterprises [SOEs] vs. private firms) shapes QFII’s ESG impact. Results (p. 4) note stronger effects in non-SOEs—explore why SOEs resist QFII governance.

• Relate the 2024 Sustainability Reporting Guidelines (p. 2) to your findings: Will mandatory disclosure weaken QFII’s role via the substitution effect?

• H4 appears twice (p. 7, 8). Renumber hypotheses consistently.

• Define "green expenses" vs. "green investment" upfront (p. 7–8) to avoid conflation.

• Clarify why green innovation (GTI) is treated separately from green investment (GI) despite overlapping R&D aspects (p. 12).

• Table 3: Report economic significance (e.g., 1% QFII increase → X-point ESG rise).

• Figure 3: Label axes and clarify how "low/high" transparency is dichotomized.

• Mechanism Tests: Include mediation proportions (e.g., GTI accounts for Y% of QFII’s total ESG effect).

• Tailor recommendations to China’s "dual carbon" goals. Example: "Policymakers could channel QFII quotas toward firms in high-pollution sectors to amplify green innovation."

• Caution against overreliance on transparency: High transparency may reduce QFII monitoring but increase public scrutiny—discuss trade-offs.

• Acknowledge that QFII excludes non-institutional foreign capital (e.g., sovereign wealth funds). Suggest comparing QFII with Stock Connect investors.

• Recommend exploring social/governance pillars (e.g., labor practices, board diversity) beyond aggregate ESG scores.

Author Response

Please see the attachment.

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

Author/s have addressed all comments appropriately
Good luck 

Reviewer 2 Report

Comments and Suggestions for Authors

Dear authors,
Thank you for the opportunity to review your interesting paper, and for considering my comments.

Reviewer 3 Report

Comments and Suggestions for Authors

No further concerns.  Congrats for the job done.

Reviewer 4 Report

Comments and Suggestions for Authors

I have gone through all the manuscripts. The Authors have address all the comments. Therefore, on my side, no further revisions are required.