ABSTRACT In response to stricter environmental regulations and increased stakeholder awareness, firms are increasingly focused on enhancing their ESG performance. However, limited research has explored how environmental regulation affects corporate ESG environmental performance, particularly through the mediating role of green innovation. This study addresses this gap by analyzing the influence of environmental regulation on corporate ESG performance in China, using panel data from listed firms between 2010 and 2023. Our findings reveal that: (1) stringent environmental regulations hinder ESG environmental performance; (2) green innovation mediates the relationship between environmental regulation and ESG environmental performance; (3) the negative impact of regulations on ESG environmental performance is mitigated in firms with environmental management systems, yet intensified in state‐owned enterprises and high‐polluting industries. This research offers insights into the effects of environmental regulation on corporate practices, highlighting implications for advancing a green economy in transitional economies like China.
Wei et al. (Mon,) studied this question.
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