The effect of political turnover on corporate ESG performance: Evidence from China

Chao Yang; Wenhan Hao; Di Song

doi:10.1371/journal.pone.0288789

The effect of political turnover on corporate ESG performance: Evidence from China

PLoS One. 2023 Jul 24;18(7):e0288789. doi: 10.1371/journal.pone.0288789. eCollection 2023.

Authors

Chao Yang¹, Wenhan Hao², Di Song³

Affiliations

¹ School of Accountancy, Beijing Wuzi University, Beijing, China.
² School of Sports Business, Beijing Sport University, Beijing, China.
³ Business School, China University of Political Science and Law, Beijing, China.

Abstract

This paper aims to investigate the effect of political turnover on corporate ESG performance in China. By analyzing data from Chinese A-share-listed companies between 2010 and 2020, we have discovered that changes in the municipal party committee secretary or the mayor of the prefecture-level city where a firm is located have a detrimental effect on corporate ESG performance. Compared with the change of the party committee, the change of mayor has a more pronounced negative impact on ESG performance. The reason behind this negative effect is primarily attributed to policy uncertainty, which leads to a decrease in governmental subsidies and an increase in ineffective under-investment by companies, consequently resulting in decreased corporate ESG performance. Furthermore, we have also observed that the adverse influence of political turnover on corporate ESG performance is relatively mitigated in SOEs, politically connected firms, and tertiary industries. These findings contribute to a deeper understanding of the relationship between political uncertainty and corporate behavior, particularly in emerging markets.

Copyright: © 2023 Yang et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Publication types

Research Support, Non-U.S. Gov't

MeSH terms

Asian People*
China
Humans
Industry*
Investments
Organizations
Politics*
Sustainable Development*

Grants and funding

The research is sponsored by the National Social Science Fund Youth Program (Grant No. 22CGL010) and the recipient of the fund is Dr. Song. URLs to sponsors’ websites as following: http://www.nopss.gov.cn/ The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript. The authors received no other specific funding or salary for this work from any commercial company.