How does low-carbon city pilot policy catalyze companies toward ESG practices? Evidence from China

Guochao Wan, Weike Zhang and Chao Li

Economic Analysis and Policy, 2024, vol. 81, issue C, 1593-1607

Abstract: The Low-carbon City Pilot Policy (LCPP) represents a pivotal measure for China in advancing its green and low-carbon transition. Previous literature has extensively discussed the impact of LCPP on companies’ micro-behavior, yet its influence on corporate environmental, social, and governance (ESG) practices remains unclear. Drawing on data from Chinese A-share listed companies spanning the period from 2010 to 2020, we investigate the impact of LCPP on ESG practices utilizing a staggered difference-in-differences (DID) method. Our analysis reveals that LCPP significantly contributes to the improvement of corporate ESG practices, especially among companies situated in eastern regions, those with consistent institutional investors, those with large-scale, and those exhibiting superior internal control quality. Moreover, we identify two underlying mechanisms — namely, bolstered corporate dynamic capabilities and heightened analysts' attention — as primary conduits through which LCPP fosters corporate ESG practices. These findings provide decision-making regarding the LCPP and corporate sustainable development.

Keywords: Low-carbon city pilot policy; Environmental; Social, and Governance (ESG); Dynamic capabilities; Analysts’ attention; Institutional investors (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:81:y:2024:i:c:p:1593-1607

DOI: 10.1016/j.eap.2024.02.036

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