The Influence and Mechanism of ESG Peer Effect on Green Innovation of Heavy-Polluting Enterprises

With the establishment of the Chinese "dual-carbon" goal, green innovation is becoming increasingly important for enterprises, and ESG performance provides opportunities for green innovation development by conveying non-financial information to the market. Although studies have demonstrated that ESG performance impacts green innovation, it is still necessary to clarify the peer effect perspective of this relationship. Thus, from the standpoint of industry spillovers, this article examines how peer firms' publication of ESG ratings affects target firms' innovation in green technologies. The research object for the paper is the listed businesses of major polluters in the Chinese A-share market between 2009 and 2022. It empirically examines the impact of peer ESG disclosure on corporate green innovation and the mechanism of its role. The results show that there is indeed a peer effect on ESG disclosure of heavy polluters, and corporate ESG performance is affected by ESG ratings of peers. Meanwhile, the peer effect promotes improving the green innovation level of target companies. It still holds after robustness tests. The mediating mechanism test shows that the ESG peer effect promotes green innovation by alleviating financing constraints, mitigating information asymmetry, and increasing firms' green awareness. Heterogeneity analysis finds that the impact of ESG peer effects on green innovation is more significant in State-owned firms, large-scale firms, and firms in the east-central region.