Social identity or social capital: Local CEOs and corporate ESG performance

Using data of 1807 Chinese listed private firms spanning from 2010 to 2021, we investigate the impact of local CEOs on corporate environmental, social and governance (ESG) performance and its mechanisms from the dual perspectives of social identity and social capital. We also empirically identify the differences between ESG and corporate social responsibility (CSR) by examining how local CEOs respond differently to ESG and CSR in different scenarios. We find that firms whose CEOs’ birthplace is located in the same city as the location of their corporate headquarters have better ESG performance. Mechanism analysis indicates that local CEOs enhance corporate ESG performance due to stronger hometown identity rather than social capital. Further analysis shows that when companies face greater financing constraints and macroeconomic uncertainty, local CEOs continue to prioritize ESG but are no longer actively engaged in CSR, highlighting the distinct approaches companies take toward ESG and CSR.