Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China
Numerous of studies have associated government regulatory systems with corporate ESG performance, but insufficient research has considered the significance of regulatory enforcement. The random inspection system implemented by the Ministry of Ecology and Environment represents a significant innovati...
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| Format: | Article |
| Language: | English |
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IOP Publishing
2025-01-01
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| Series: | Environmental Research Communications |
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| Online Access: | https://doi.org/10.1088/2515-7620/addbae |
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| author | Jiabao Fei Ming Zhang Kun Xiao Wahid Ullah Jianghan Wang |
| author_facet | Jiabao Fei Ming Zhang Kun Xiao Wahid Ullah Jianghan Wang |
| author_sort | Jiabao Fei |
| collection | DOAJ |
| description | Numerous of studies have associated government regulatory systems with corporate ESG performance, but insufficient research has considered the significance of regulatory enforcement. The random inspection system implemented by the Ministry of Ecology and Environment represents a significant innovation in regulating the government’s environment enforcement practices in China. Taking A-share listed non-financial firms from 2009 to 2022 as a sample, we investigate the impact of this system on corporate ESG performance using a staggered difference-in-differences model. The main relevant findings are as follows: First, this system significantly improves the ESG performance of enterprises that have been randomly inspected by local environmental protection departments, with notable improvements observed across the environmental (E), social (S), and governance (G) subdimensions; Second, this system drives enterprises to increase their ESG performance through the mediating mechanisms of attention allocation and green response; Third, this system has a stronger positive effect on corporate ESG performance when enterprises are heavily polluting, non-state-owned, located in favorable business environments and situated in regions with loose fiscal statuses; Fourth, by improving corporate ESG performance, this system significantly enhances main business performance, increases market value and enhances green productivity; Fifth, the results illustrate the significant industry- and city-level spillover effects from improved ESG performance driven by this system, while provincial spillover effects are not evident. This study contributes to the literature by providing new insights into the determinants of corporate ESG performance from the perspective of regulatory enforcement and revealing the effectiveness of the random inspection system in promoting sustainable development. Following the aforementioned findings, we recommend that government departments actively implement this system, optimize business environments, adopt measures to improve financial statuses and facilitate the sharing of ‘one list and two databases’ within the province to further boost corporate ESG performance. |
| format | Article |
| id | doaj-art-d480b433d1d64a24809405b4e2011cbb |
| institution | DOAJ |
| issn | 2515-7620 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | IOP Publishing |
| record_format | Article |
| series | Environmental Research Communications |
| spelling | doaj-art-d480b433d1d64a24809405b4e2011cbb2025-08-20T03:13:01ZengIOP PublishingEnvironmental Research Communications2515-76202025-01-017505503210.1088/2515-7620/addbaeRegulatory enforcement and corporate ESG performance: evidence from the random inspection system in ChinaJiabao Fei0Ming Zhang1Kun Xiao2Wahid Ullah3https://orcid.org/0000-0001-9370-133XJianghan Wang4https://orcid.org/0009-0004-1335-9060College of Economics and Management, China Three Gorges University , Yichang 443002, People’s Republic of ChinaCollege of Economics and Management, China Three Gorges University , Yichang 443002, People’s Republic of ChinaSchool of Virtual Reality (VR) Modern Industry, Jiangxi University of Finance and Economics , Nanchang 330013, People’s Republic of China; Institute of Tourism development, Jiangxi University of Finance and Economics , Nanchang 330013, People’s Republic of ChinaResearch Center for Pacific Islands Countries, Liaocheng University , Liaocheng 252000, People’s Republic of ChinaCollege of Economics and Management, China Three Gorges University , Yichang 443002, People’s Republic of ChinaNumerous of studies have associated government regulatory systems with corporate ESG performance, but insufficient research has considered the significance of regulatory enforcement. The random inspection system implemented by the Ministry of Ecology and Environment represents a significant innovation in regulating the government’s environment enforcement practices in China. Taking A-share listed non-financial firms from 2009 to 2022 as a sample, we investigate the impact of this system on corporate ESG performance using a staggered difference-in-differences model. The main relevant findings are as follows: First, this system significantly improves the ESG performance of enterprises that have been randomly inspected by local environmental protection departments, with notable improvements observed across the environmental (E), social (S), and governance (G) subdimensions; Second, this system drives enterprises to increase their ESG performance through the mediating mechanisms of attention allocation and green response; Third, this system has a stronger positive effect on corporate ESG performance when enterprises are heavily polluting, non-state-owned, located in favorable business environments and situated in regions with loose fiscal statuses; Fourth, by improving corporate ESG performance, this system significantly enhances main business performance, increases market value and enhances green productivity; Fifth, the results illustrate the significant industry- and city-level spillover effects from improved ESG performance driven by this system, while provincial spillover effects are not evident. This study contributes to the literature by providing new insights into the determinants of corporate ESG performance from the perspective of regulatory enforcement and revealing the effectiveness of the random inspection system in promoting sustainable development. Following the aforementioned findings, we recommend that government departments actively implement this system, optimize business environments, adopt measures to improve financial statuses and facilitate the sharing of ‘one list and two databases’ within the province to further boost corporate ESG performance.https://doi.org/10.1088/2515-7620/addbaeregulatory enforcementrandom inspection systemcorporate ESG performancegreen productivitybusiness environments |
| spellingShingle | Jiabao Fei Ming Zhang Kun Xiao Wahid Ullah Jianghan Wang Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China Environmental Research Communications regulatory enforcement random inspection system corporate ESG performance green productivity business environments |
| title | Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China |
| title_full | Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China |
| title_fullStr | Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China |
| title_full_unstemmed | Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China |
| title_short | Regulatory enforcement and corporate ESG performance: evidence from the random inspection system in China |
| title_sort | regulatory enforcement and corporate esg performance evidence from the random inspection system in china |
| topic | regulatory enforcement random inspection system corporate ESG performance green productivity business environments |
| url | https://doi.org/10.1088/2515-7620/addbae |
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