The paradox of government-guided funds: A negative impact on corporate ESG performance?!

Xubo Zhang, Xinyu Zhang and Yanbin Tu

Finance Research Letters, 2025, vol. 75, issue C

Abstract: This paper examines the relationship between government-guided fund (GGF) investment and corporate ESG (Environmental, Social, and Governance) performance using China's A-share companies that received GGFs from 2013 to 2022. Our analysis indicates a significant negative correlation between GGFs holdings and ESG performance, with one period lagged effect. This negative correlation is pronounced for non-state-owned enterprises but insignificant for state-owned enterprises. For state-owned enterprises, robust regional economic development and stringent environmental regulations mitigate the negative GGF correlation. This study provides new insights into the relation of GGFs with corporate sustainability.

Keywords: Government-guided funds; ESG; Ownership structure; Regional economic development; Environmental regulations (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001643

DOI: 10.1016/j.frl.2025.106900

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