The Impact of Executive Green Incentives and Top Management Team Characteristics on Corporate Value in China: The Mediating Role of Environment, Social and Government Performance

Abstract

The pursuit of economic growth remains a consistent focal point in the development of nations. However, this heightened emphasis on economic expansion has precipitated a global environmental crisis (e.g., climate change, air pollution, etc.). Numerous countries have announced targets and commitments aimed at mitigating carbon emissions. Enterprises are the mainstay of economic development. In the context of low-carbon development, the current challenge faced by enterprises lies in transforming their business philosophy and value orientation to achieve a harmonious integration of economic growth and carbon emission reduction. Consequently, within the framework of sustainable development, the stability and developmental trajectory of enterprise value have emerged as prominent research subjects in recent years. As the concept of sustainable development gradually permeates society, there has been widespread attention from various sectors toward evaluating corporate environmental, social and governance (ESG) performance. This study focuses on listed companies in China’s manufacturing industry as the research subject. Drawing upon the principal–agent theory, stakeholder theory, upper echelon theory and tournament incentive theory, we aim to validate the feasibility of selecting a top management team that aligns with the characteristics of sustainable development during enterprise transition. By constructing a structural equation model and conducting hypothesis testing under the premise of limited rationality among top management, we explore how green incentives provided to top management impact both enterprise transition toward sustainability and enhancement of corporate value. Additionally, we investigate how demographic characteristics of top management contribute to amplifying the role of green incentives on corporate value. The results show that executive green incentives and top management team characteristics positively impact the corporate environment, social and government (ESG) performance and that implementing environment, social and government aspects can improve corporate value. Upon further analysis, it is found that there is a moderate degree of coupling between top management team characteristics and executive green incentives in promoting better ESG performance and enhancing corporate value. This study provides empirical evidence of the favorable economic outcomes associated with environmental, social and governance (ESG) performance, which offers valuable insights for companies to consider when selecting and incentivizing executives, as well as for government departments aiming to enhance environmental, social and governance (ESG) incentive policies.

Formal Institutional Pressure and the Integration of Corporate Environmental and Financial Performance: Empirical Evidence from Listed Companies in Heavily Polluting Industries in China

“…Although the constraints and incentives from the formal system are the same when officials in the same region make behavioral decisions, based on the Upper Echelons Theory, executives' environmental background [32], executives' mindset [33], and executives' values [34] will also have an impact on corporate environmental behavior decisions. Executive differentiation is a key factor that explains the differences in the way companies respond to the same environment [32].…”

Executives’ academic experience and corporate social responsibility: A case study in China

“…Several studies focus on the impact of executives with academic experience on the firm. In existing research, it has been found that not only the quality of corporate auditing can effectively regulate corporate ESG [ 18 ], executive characteristics can also effectively improve corporate CSR performance [ 19 ], improve the level of corporate environmental performance [ 20 , 21 ] and promote environmentally sustainable development [ 22 ]. Tax avoidance behavior of enterprises can also be reduced by enhancing the executives’ sense of social responsibility and increasing their risk avoidance awareness through academic experience [ 23 ].…”