Path to Green Development: How Do ESG Ratings Affect Green Total Factor Productivity?

Si Wu (), Minhao Fan, Lei Wu, Zaiqi Liu () and Yuchen Xiang
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Si Wu: School of Economics and Management, Wuhan University, Wuhan 430072, China
Minhao Fan: School of Economics and Management, Wuhan University, Wuhan 430072, China
Lei Wu: School of Law, Wuhan College, Wuhan 430212, China
Zaiqi Liu: School of Economics and Management, Wuhan University, Wuhan 430072, China
Yuchen Xiang: School of Economics and Management, Wuhan University, Wuhan 430072, China

Sustainability, 2024, vol. 16, issue 23, 1-19

Abstract: Global environmental issues are becoming increasingly prominent and environmental, social and governance (ESG) ratings may play a key role in green development by stimulating informal environmental regulation from stakeholders. As a pivotal criterion for measuring green development, green total factor productivity (GTFP) refers to maximizing output while minimizing the environmental pollution for the required input production factors. Existing research neglects the impact of ESG ratings on GTFP that indicates the balance between economic growth and ecological protection. This study examines the impact of ESG ratings and mechanisms on GTFP using a sample of Chinese A-share listed manufacturing firms between 2010 and 2021. The findings indicate that ESG ratings promote corporate GTFP, a result which remains robust after a series of robustness tests. The mechanism analysis reveals that ESG ratings improve corporate GTFP by alleviating financial constraints, mitigating managerial myopia, and enhancing supply chain efficiency. A moderating analysis verified that managerial power weakens the positive impact of ESG ratings on corporate GTFP. The positive effect of ESG ratings on GTFP is more pronounced among non-state-owned firms and firms in non-heavily polluting and highly competitive industries. This study confirms that ESG ratings can achieve the benefits of productivity growth, energy conservation, and pollution reduction at the micro-enterprise level, offering a policy foundation for promoting ESG disclosure and achieving green development.

Keywords: ESG ratings; green total factor productivity; financial constraints; managerial myopia; supply chain efficiency; managerial power (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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