Firm ESG Performance and Supply-Chain Total-Factor Productivity

Promoting firms’ green evolution and achieving sustainable, high-quality development have become crucial for firms’ sustainability. This study uses data from publicly listed automotive manufacturing firms from 2009 to 2022 to examine the impact of target firms’ environmental, social, and governance (ESG) performance on total-factor productivity (TFP) at upstream and downstream firms from a supply-chain perspective. By employing a two-way, fixed-effects model, mediation analysis, and a moderation model, the study provides comprehensive insights. The findings reveal the following: (1) The ESG performance of target firms in automotive manufacturing significantly improves the TFP of downstream customers, and this conclusion is robust even when using instrumental variable methods, additional control variables, and rigorous robustness tests. (2) Mechanism analysis indicates that the ESG performance of target firms alleviates the financing constraints of their customers, thereby positively impacting the customers’ TFP. Additionally, the study finds that the monopolistic power of the target firm negatively moderates the relationship between its ESG performance and the TFP of its customers. These empirical findings enhance the understanding of supply-chain spillover effects and provide a new theoretical foundation for improving firms’ ESG performance.