Star CEOs and ESG performance in China: An integrated view of role identity and role constraints logics

Abstract

This study seeks to shed light on the effect of star CEOs on the environmental, social, and governance (ESG) performance of Chinese firms. Relying on the theoretical perspective of role identity and role constraints, we analyze data from 1222 Chinese firms listed on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2019. The results analyzed using the ordinary least squares estimate method reveal a positive effect of star CEOs' extreme confidence and legitimacy pressure mechanisms on ESG performance. We also find that this positive relationship is negatively moderated by higher organizational slack but strengthened by a lower level of regional marketization, as the degree of firms' dependence on external stakeholders' resources differs significantly. Additionally, this study finds that ESG activities are less likely to be associated with firm performance if star CEOs pursue them to satisfy their need for star status. These findings supplement the early tests of the influence mechanism of star CEOs on organization‐level results and expand the context discussion of role identity and role constraints theory in the Chinese institutional environment.

ESG performance and firms' innovation efficiency: the moderating role of state-owned firms and regional market development

“…To transition from a centrally planned to a market economy, various regions in China have implemented market-oriented reforms over the past few decades (Li et al, 2023c;Xie, 2017). The degree of regional market development reflects the extent to which a market plays a role in resource allocation.…”

“…Although pro-market reform policies are set by the Chinese central government, they are implemented at different levels and speeds by provincial governments (Zhong et al, 2022). Therefore, there are significant differences in market development progress across regions in China (Li et al, 2023c;Yang et al, 2022). It is generally believed that higher the degree of market development, the weaker the role of government intervention, the stronger the role of services and the better the quality of government, leading to less government intervention in firm matters (Xie, 2017;Yang et al, 2022).…”

“…By contrast, ESG signals play a stronger signaling role in improving firms' innovation efficiency in regions with low market development. In addition, firms in regions with higher market development have stronger sustainability perceptions than those in regions with lower market development (Zhong et al, 2022), and they more actively and more broadly engage in ESG activities (Li et al, 2023c). This means that in regions with high market development, core stakeholders may become desensitized to ESG signals from specific firms because they also simultaneously receive a large number of ESG signals from other firms.…”