Summary:
The report of the Twentieth National Congress of the Communist Party of China pointed out that Chinese path to modernization is a modernization in which people and nature coexist in harmony. We should adhere to sustainable development and unswervingly follow the path of civilized development featuring production development, rich life, and good ecology. The Guiding Opinions on Accelerating the Construction of world-class Enterprises, released by the Central Committee for Deepening Reform and the State Council in 2022, propose to build world-class enterprises. Unlike the traditional growth model that targets shareholder profits, the ESG core business model will promote inclusive growth and upgrading of Chinese enterprises, shaping specific advantages for China to build world-class enterprises. In addition, from the practice of China's economic development, it can be seen that Chinese economy has shifted from a stage of high-speed growth to a stage of high-quality development. A series of problems, such as aging population, widening income distribution gap, and climate change, have gradually become prominent. As an important driving force for economic growth, enterprise upgrading will become a key task for economic transformation and development, and research on enterprise upgrading has also become an important growth point in the theoretical field. On a global scale, the regulatory pressure on sustainable management in emerging markets is also increasing. The practice of ESG regulation in China started relatively late, but it is gradually catching up with other countries, which brings challenges and opportunities for the upgrading of Chinese enterprises. So has the continuous transparent disclosure of ESG activity information promoted the upgrading of enterprises？ Some literature suggests that the improvement of ESG performance directly promotes the improvement of enterprise efficiency and brings better financial performance to the enterprise. Some literature suggests that corporate investment in ESG may not bring additional direct monetary benefits to the company. The reputation effect of enterprise participation in ESG activities is mainly enjoyed by managers (such as general managers), while the potential risks and costs related to ESG investments are borne by shareholders. Overinvestment in ESG has squeezed out core technology research expenses, which has had a negative impact on the company's high-quality development. The theoretical research with divergent views mentioned above is mostly based on the study of mature market structures in developed economies. In emerging market economies with gradually established high standard market systems, the relationship between ESG activity performance and enterprise upgrading needs further exploration and testing. The logical argument of this article is to introduce the rating of ESG activities into the theoretical analysis framework, comprehensively examining the impact of ESG activity performance on enterprise upgrading. Based on relevant research, this article summarizes and analyzes four key mechanisms by which ESG activity performance affects enterprise upgrading: first, financing constraint channel; second, agency cost channel; third, reputation effect channel; and fourth, information disclosure quality channel. The performance of ESG activities not only significantly affects the allocation of credit funds in China's capital market, but also improves the efficiency of fund allocation by market entities willing to allocate funds to companies with better ESG activity performance. Moreover, ESG activity performance is conducive to alleviating information asymmetry among stakeholders and improving corporate governance. In addition, good performance in ESG activities can significantly enhance a company's reputation, promote the quality of information disclosure, and in turn promote the upgrading of the company. This indicates that increasing the investment of listed companies in ESG is conducive to promoting sustainable growth and development of enterprises. The advantages brought by ESG activities of enterprises provide great assistance in strategic and operational aspects for China to build world-class enterprises and enhance domestic and international competitiveness. However, it should be noted that the uncertainty of ESG ratings will to some extent weaken the promoting effect of ESG activity performance on enterprise upgrading. This article further verifies the four channel mechanisms mentioned above by examining the empirical data of listed companies from 2008 to 2021, providing the latest empirical evidence for the development of integrated emerging market environment, society, and governance. The performance of ESG activities of listed companies has significantly and steadily promoted the upgrading of enterprises, which is reflected in the growth of total factor productivity, patent output (including green patents), economic value added, financial performance, and comprehensive upgrading indicators. Compared to existing research, this article may contribute in the following three aspects: firstly, this article may be an earlier study exploring the impact of corporate ESG activity performance on corporate upgrading. Unlike most literature on external governance affecting corporate upgrading, this article attempts to explore the role of third-party agency ESG ratings in the process of corporate upgrading from the perspective of third-party agency ratings. It reveals that corporate ESG activities mainly affect corporate upgrading through four channels: reducing financing constraints and agency costs, and improving corporate reputation and information disclosure quality, Enriched and expanded research in related fields such as the high standard market system and ESG impact. Secondly, in addition to the total factor productivity indicator, this article also constructs a multidimensional indicator evaluation system for enterprise upgrading from the perspectives of patent output, economic value added, and financial performance. The principal component analysis method is used to construct a comprehensive upgrading indicator that integrates most of the upgrading indicators, providing evidence that ESG activities promote enterprise upgrading in more fields; Third, this paper not only uses the logarithm of the number of ESG funds that hold this stock as the instrumental variable of ESG scores to alleviate the possible endogenous problems, but also constructs multiple DID model policy impact variables such as environmental protection law, dual carbon policy, low-carbon city pilot policy, smart city pilot policy, broadband China, and the "the Belt and Road" to eliminate the interference of external policies on the role of ESG activities and ensure the robustness of the results as far as possible. The results of this study help market participants (including businesses, investors, and regulatory agencies) fully recognize the impact of ESG information disclosure on business and social development. Based on the research conclusion of this article, it contains the following policy implications: firstly, to improve the evaluation and information disclosure mechanism of corporate ESG. Enterprises should actively disclose non-financial information, strengthen ESG practices, improve ESG ratings, which is conducive to improving corporate governance capabilities and overall performance, in order to achieve better ESG investment returns. Enterprises should prioritize improving environmental protection, social responsibility, and corporate governance as important strategies to promote sustainable development and drive long-term value growth. Secondly, in the context of sustainable development, the government should improve the ESG support system and measures for listed companies, reduce capital allocation friction, and lower the cost of corporate debt financing to enhance the vitality of the capital market and optimize resource allocation functions. Thirdly, considering the path dependence of ESG activities, the government should strengthen the supervision of corporate ESG behavior, reduce internal and external information asymmetry, and establish a sustained and substantial ESG participation system.
汪建新. ESG活动表现与企业升级[J]. 金融研究, 2023, 521(11): 132-152.
WANG Jianxin. ESG Performance and Company Upgrade. Journal of Financial Research, 2023, 521(11): 132-152.
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