Drawing from rent extraction and institutional theories, this paper investigates how controlling shareholder influences environmental sustainability practices using global firm data. We find that concentrated ownership is associated with lower sustainability practices, supporting the rent extraction hypothesis (a form of agency theory), but not the ethical stewardship theory. However, the effect is mitigated when a firm is controlled by long-horizon controlling owners such as insurance firms or public entities, and when a firm is based in a civil law country with stakeholder orientation. Firm’s sustainability engagements are further moderated by international institutions pertaining to environmental governance. This effect is preserved when we perform a difference-in-difference analysis using the Kyoto protocol as a quasi-natural experiment. The results show the positive role of environmental institutions in promoting environmental sustainability by countering the negative private calculus of controlling corporate owners. In sum, the structure and identity of controlled ownership is a significant antecedent to corporate sustainability practices, subject to moderations by national
and international institutions.

Keywords: Corporate responsibility, Environmental sustainability, Controlling shareholders, Concentrated ownership, Investor time horizon, Non-market strategy, Owner types