State ownership, political connection and ESG performance

This study investigates the correlation between state-owned capital and Environmental, Social, and Governance (ESG) performance, with a nuanced exploration of the moderating influence of political connections. Drawing on data from publicly listed Chinese companies in a political-oriented developing nation over the span of 2013-2022, panel regression analyses unveil a noteworthy positive association between state-owned capital and ESG performance. Companies endowed with investments from state-owned capital demonstrate their commitment to sustainable practices, leveraging the resources provided by the government to enhance their ESG performance. Intriguingly, the affirmative impact is more pronounced for high market maturity provinces and heavy polluting industries compared to low market maturity provinces and non-heavy polluting industries. Moreover, political connections exhibit a positive moderating effect between the state-owned capital and ESG performance, with a particularly discernible impact on firms in high market maturity provinces and heavy polluting industries. The robustness of these findings persists through sensitivity analyses employing alternative metrics and estimation methodologies. These outcomes carry implications for investors, management, analysts, and policymakers, offering invaluable insights for companies and markets keen on fortifying their ESG policies.