Is there a peer effect on corporate ESG performance? Evidence from China’s capital market

Abstract

Corporate ESG performance is an important way for stakeholders to understand the corporate environment, social responsibility, and governance behavior. Under China’s implementation of the “carbon peak and carbon neutrality” dual carbon strategic background, ESG has become an important tool to promote the achievement of the “dual carbon” goals and high-quality development. How enterprises can reasonably and effectively improve their ESG performance and promote their green and sustainable development has become a major practical problem that urgently needs to be solved. Based on social learning and dynamic competition theories, this study takes Shanghai-Shenzhen A-share listed companies from 2011 to 2021 as research samples, empirically tests whether there is a peer effect in the ESG performance of listed companies in China, and examines the generation mechanism and influencing factors of the peer effect in the ESG performance of enterprises. The results show that: (i) There is an industry and regional peer effect on the ESG performance of enterprises, where the average ESG performance of other enterprises in the same industry and region, except for the focus enterprise, significantly affects the ESG performance of the focus enterprise.This core conclusion still holds true after robustness tests such as instrumental variable method, propensity score matching method, and first-order difference method to eliminate endogeneity issues, replace key measurement indicators, and control for macro factors. (ii) The mechanism analysis results show that the “information learning” and “competitive pressure” mechanisms promote the peer effect of ESG performance. (iii) Further research has found that institutional investors’ attention and government environmental regulations positively and significantly impact the peer effect of corporate ESG performance. (iv) Heterogeneity analysis shows that the ESG performance peer effect is more significant for large-scale, eastern, and state-owned enterprises than for small-scale, central, western, and non-state-owned enterprises. This study expands the boundaries of current ESG theory and empirical research, and the conclusions provide important policy implications for governments and enterprises.