State-Owned Equity Participation and Corporations’ ESG Performance in China: The Mediating Role of Top Management Incentives

This study examined the unique circumstances surrounding state-owned equity participation in enterprises in China. Specifically, this study examined the impact of state-owned equity participation on the environmental, social, and governance (ESG) performance of enterprises. Focusing on A-share listed firms on the Shanghai and Shenzhen Stock Exchanges, and using data from 2013 to 2021, the results of our empirical testing showed that state-owned equity participation could significantly improve the ESG performance of enterprises, with this conclusion remaining reliable after a series of robustness tests. Top management incentives were a mediating mechanism for state-owned equity participation in enhancing ESG performance. This study also found that when state-owned equity participated in large enterprises, or companies with a high degree of digital transformation, the effect on the ESG performance was greater than in small or medium-sized enterprises, or enterprises with a low level of digital transformation. The findings of this study add to the current body of research on the factors influencing corporate ESG performance, and the impact of state-owned equity on corporate non-financial performance.