This study investigates whether and to what extent bank control over firms by their representation on boards of directors and by equity holdings through trust business may affect corporate environmental responsibility. Using a large sample of listed firms in the United States from 2004 to 2016, we find that banker directors with equity affiliation improve firms’ environmental performance scores and such impact is associated with affiliated bank’s shareholdings, investment horizon, and environmental orientation. Additionally, we document that the effects of bank control on firm’s environmental investments is stronger for firms with more short-term institutional investors but weaker for firms with more analyst coverage. Moreover, we find that when firms are financially constrained, banker directors reduce environmental investments. Finally, product-market competition matters for a firm’s environmental strategies as the relation of bank control and environmental investments is more profound under conditions of greater industry competition.

We investigate the effects of social trust on foreign institutional investors’ equity holdings in listed Chinese firms from 2005 to 2011. We find that social trust embedded in the regional environment is an important factor for the investment decisions of foreign institutional investors. We also find that the proportion and likelihood of foreign ownership increases with the level of social trust. The results support the notion that social trust and trust-related information help mitigate informational barriers in international equity investments. Our results are robust to alternative measures of social trust and a range of model specifications, including instrumental variable estimation. We document that the effects of social trust on foreign ownership diminishes in the presence of organizational learning, better formal institutional development, conservative financial reporting, and asset transparency. We also show that foreign institutional investors from countries with a common law origin are more likely to incorporate trust-related information in their investment decisions.