Can ESG ratings drive innovation in sports businesses? An empirical study of A-share listed sports companies

Purpose This study examines whether ESG (environmental, social and governance) ratings can drive innovation in sports businesses. It specifically investigates A-share listed sports companies between 2014 and 2022, using ESG ratings as an exogenous event and applying a difference-in-differences method to empirically assess their impact on innovation. Design/methodology/approach The study employs the difference-in-differences (DID) method to construct a quasi-natural experiment. It uses ESG rating data from the Wind Database and innovation proxy data from patents filed by sports companies. Multiple robustness tests, such as parallel trend analysis, placebo testing and lagged variable analysis, are applied to ensure the reliability of the results. Findings The study finds that ESG ratings significantly promote innovation within sports companies. This effect is more pronounced in sports manufacturing firms compared to service firms. The research identifies two primary mechanisms through which ESG ratings foster innovation: enhancing access to capital and motivating employees to engage in innovation. Originality/value This study contributes to the literature by focusing on the underexplored sports sector and empirically analyzing the relationship between ESG ratings and innovation. It also integrates signaling theory and human capital theory to explain how ESG ratings influence innovation through financial and employee-driven mechanisms.