Despite stringent environmental regulations, the divergence between private costs and social benefits frequently induces symbolic rather than substantive firm compliance. This study investigates Executive Green Cognition (EGC) as an internal mechanism to mitigate this distortion. Using a text-based index derived from Management Discussion and Analysis (MD&A) disclosures of Chinese listed firms (2010–2024), we demonstrate that higher EGC significantly facilitates corporate green transition by enhancing both green innovation output and Total Factor Productivity. Supporting the micro-foundations of the Porter Hypothesis, we find that these productivity gains coincide with reduced Carbon Emission Intensity (CEI), thereby ruling out scale expansion effects. Mechanism tests indicate that EGC reduces agency costs by reallocating resources from non-productive defensive expenditures to substantive green investments. Furthermore, digital transformation positively moderates this relationship by lowering implementation costs. These findings highlight EGC as a critical micro-foundation for shifting firms from passive compliance to endogenous sustainable development.
Ji et al. (Mon,) studied this question.