Effect of firm social status on ESG performance: Theoretical mechanism and heterogeneity analysis

Firm social status affects decision-making and external stakeholders' evaluation, which affects ESG performance. Drawing upon the perspective of firm social attributes, we empirically examine the effect of firm social status on ESG performance and the mechanism. Our sample comprises Chinese-listed firms in Shanghai and Shenzhen A-shares. Our findings indicate that firms with high social status can significantly improve ESG performance. Both media coverage and high-speed rail lines positively moderate the relationship between firm social status and ESG performance. The test for mediated effects reveals that firm social status promotes firms' ESG performance by reducing financing constraints and increasing information transparency. Using Heckman's two-stage model and propensity score matching to address the endogeneity concern and robustness testing by changing data sources and alternative measures for variables, the positive effect of firm social status on ESG performance still holds. The heterogeneity analysis shows that the effect of firm social status on ESG performance is more pronounced for low independent directors' share firms, non-state-owned enterprises (non-SOEs), low environmental attention firms, non-heavily polluting firms, and competitive industry firms. We further demonstrate that ESG performance mediates the relationship between firm social status and innovation.