Do carbon emissions strengthen institutional ownership-environmental performance?

This study examines whether carbon emissions strengthen the relationship between institutional ownership and environmental performance among publicly listed firms in Nigeria. Using a balanced panel of 152 firms over the period 2015–2024, the study adopts a quantitative ex post facto research design and employs fixed-effects panel regression with robust standard errors. Environmental performance is modelled as a function of institutional ownership, carbon emissions, and their interaction, while controlling for firm size, industry type, financial performance, board independence, leverage, regulatory environment, growth opportunities, and managerial ownership. The results show that institutional ownership has a positive and significant effect on environmental performance, whereas carbon emissions exert a negative and significant effect. Crucially, the interaction between institutional ownership and carbon emissions is positive and statistically significant, indicating that institutional investors mitigate the adverse impact of high carbon emissions on firms’ environmental performance. The findings further reveal that firm size, profitability, board independence, and regulatory environment enhance environmental performance, while leverage constrains it. Overall, the study provides robust evidence that institutional ownership serves as an effective governance mechanism for improving environmental outcomes in emission-intensive contexts, with important implications for policymakers, investors, and corporate managers in emerging economies.