Political connections and bias in ESG news

Abstract

This study analyzes how political connections influence Environmental, Social, and Governance (ESG) sentiment scores. Using ESG news data from Chinese publicly listed companies, we show that companies with political connections have significantly higher sentiment scores for ESG news than others. However, the effect arises primarily because they leverage the political power derived from these connections to interfere with media coverage rather than due to superior actual ESG performance. The effect is more pronounced in state-owned enterprises, older firms, companies with highly educated executives, and male-dominated firms. We also find that the impact of political power on ESG news is not limited to local areas but extends to other cities, while anti-corruption campaigns significantly mitigate this effect.