Rowing or crowding? The nonlinear effects of State-owned capital participation on ESG performance in private enterprises

Under the guidance of sustainable development principles, guiding private firm to promote the improvement of ESG performance become a critical issue. Using data from China’s A-share private listed companies from 2009 to 2022, this paper explores the nonlinear effects of state-owned capital participation (SOCP) on private enterprises’ ESG performance, grounded in alternative institutions theory. The empirical results reveal an inverted U-shaped relationship between SOCP and private enterprises’ ESG performance, driven by the resource effect and crowding-out effect. Further heterogeneity tests examine the differential impacts of more environmental regulation pressure, higher industry competition intensity and better internal control quality can intensify the inverted U-shaped relationship. Further differentiation of the E, S, and G dimensions reveals that the inverted U-shaped relationship is only significant in the S and G dimensions, while it is not significant in the E dimension, which can be explained by “greenwashing” behaviors among private enterprises. This study provides insights into deepening SOCP to enhance corporate ESG performance and offers guidance for the promotion of sustainable development in emerging economies.