How does environmental regulatory stringency shape ESG? Evidence from cross-listing

Rufei Ma, Yuhua Chen, Qiang Ji and Pengxiang Zhai

International Review of Financial Analysis, 2025, vol. 104, issue PB

Abstract: This paper investigates whether and how the regulatory environment shapes firm-level ESG performance. Using a sample of firms cross-listed in the Chinese mainland and the Hong Kong China stock markets, we find that a stricter regulatory framework brings better firm-level ESG performance. This positive impact on ESG performance is more profound in firms with higher degrees of reputational pressure, which supports the reputational bonding hypothesis. We also find that the Hong Kong China market demonstrates stronger ESG endorsement for cross-listed firms. In general, our findings highlight the importance of a stringent regulatory environment and justify regulatory modifications in regions that do not yet mandate ESG disclosure.

Keywords: ESG; Environmental regulatory stringency; Cross-listing; Reputational bonding (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:104:y:2025:i:pb:s105752192500403x

DOI: 10.1016/j.irfa.2025.104316

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