Forced or willing: A study of corporate ESG peer effects and value from the perspective of institutional isomorphism

This study focuses on China’s institutional environment and uses an institutional isomorphism framework derived from institutional theory to scrutinize the drivers behind corporate environmental, social responsibility, and corporate governance (ESG) peer behavior and its implications for firm value. The study reveals that Chinese listed firms exhibit a peer effect in their ESG practices, yet distinct institutional environments significantly influence the motives and efficacy of corporate ESG peer behavior. Coercive isomorphic pressures can lead firms to blindly imitate ESG practices, consequently impairing firm value. Within the framework of imitative isomorphism, firms situated within the mid-range of industry profitability demonstrate the most pronounced enhancement in firm value through their ESG imitation behavior. In the context of normative isomorphism, it is evident that in markets with lower regulatory standards, there is an exacerbation of the speculative phenomenon of corporations excessively mimicking ESG practices, ultimately resulting in a detrimental impact on firm value. JEL CLASSIFICATION: D21,D23,L2