Managerial Autonomy in Action: <scp>ESG</scp> Transformations in Chinese <scp>SOEs</scp> Through <scp>SCIOC</scp> Reforms

ABSTRACT Leveraging the staggered implementation of state‐owned capital investment and operation companies (SCIOC) reform across China as a quasi‐natural experiment, this paper documents that enhanced autonomy through SCIOC reform significantly improves SOEs' ESG performance. Our analyses reveal three channels: decreased government‐appointed management, increased environmental risk awareness, and strengthened market responses. Further analyses reveal that reform effects are particularly pronounced among SOEs with stronger initial government protection, including central SOEs and policy‐supported firms. Collectively, our study contributes to the literature on state ownership and corporate sustainability by demonstrating how institutional reforms that enhance managerial autonomy can effectively promote ESG practices in SOEs, challenging the traditional agency view that reduced government oversight necessarily compromises social objectives.