State-owned shareholders’ participation and environmental, social, and governance performance of private firms: evidence from China

We investigate the relationship between state-owned shareholders' participation and the environmental, social, and governance (ESG) performance of private firms. Based on a sample of Chinese private firms between 2009 and 2022, we find that state-owned shareholders' participation can significantly improve the ESG performance of private firms. Our mechanism tests suggest that state-owned shareholders play a role in improving the ESG performance of private firms through resource support and governance supervision. Moreover, the positive effect of state-owned shareholders' participation on ESG performance is more significant if private firms have lower carbon emission intensity and in industries with a higher degree of competition. We also find that state-owned shareholders' participation effectively increases firm value while improving the ESG performance of private firms. Our results are robust after a series of endogenous and robustness tests. The findings of our study enrich the existing research on the economic consequences of state-owned shareholders' participation in private firms and the factors influencing corporate ESG performance.