Can companies get more government subsidies through improving their ESG performance? Empirical evidence from China

Abstract

Environmental protection and social obligation fulfillment have become hot subjects as the "dual carbon" approach has been developed and deepened. The ESG system is consistent with China’s current policies, abandoning the traditional business philosophy of economic supremacy in favor of comprehensively measuring corporate social responsibility and sustainable development capability across three dimensions: environmental (E), social (S), and corporate governance (G), which receive widespread attention from all sectors of society. Based on observational data from A-share listed businesses in Shanghai and Shenzhen from 2011 to 2020, this study empirically evaluates the influence and mechanism of ESG on government subsidies. The research results indicate that enterprises can receive more government subsidies by improving ESG performance. Mechanism analysis found that corporate transparency plays a positive mediating role in the process of ESG affecting government subsidies. Further research on political affiliation and property rights has found that companies without political affiliation are more inclined to receive more government subsidies by improving ESG performance, and the impact of political affiliation and ESG performance on government subsidies is mutually complementary. Enterprises with different property rights have different strengths of motivation to increase government subsidies by improving ESG performance. State owned enterprises (excluding central enterprises) are the strongest, followed by non-state-owned enterprises, and central enterprises are the weakest. Therefore, enterprises should be further encouraged to strengthen ESG construction, improve the quality of ESG information disclosure, improve resource allocation efficiency, and promote high-quality development of enterprises.

Technology empowerment: Digital transformation and enterprise ESG performance—Evidence from China’s manufacturing sector

“…When enterprises are placed under the "spotlight", their business behaviors will be amplified infinitely, resulting in a sharp increase in the pressure of external attention, which is both an opportunity and a challenge for enterprises. Positive ESG practices will be spread rapidly by the media and analysts, improve the corporate image, and gradually increase its recognition among the government and consumers, It improves the advantages of enterprises in obtaining political resources and consumer trust [ 4 , 53 ]. However, when market observers dramatize poor market performance, the negative impact of enterprises rises geometrically and may be "labeled" as a shackles that restrict the development of enterprises.…”

“…This report provided a new direction for businesses on how to implement sustainable development principles. The concept of ESG originates from ethical investment and responsible investment, rejecting the profit-centric business philosophy, and advocating for enterprises to incorporate environmental, social, and governance factors into their investment decisions while considering economic benefits [ 2 – 4 ]. Currently, there is a global wave of low-carbon transformation underway, leading all countries worldwide to introduce ESG-related policies and regulations.…”

Green R & D investment, ESG reporting, and corporate green innovation performance

“…There are three plausible reasons why ESG was chosen as the research variable in this study. First, ESG information can effectively illustrate a company’s financial efforts in ESG [ 38 , 39 ]. Secondly, ESG data is the most impartial way to evaluate the long-term performance of a firm, indicating valid differentiation in the model.…”