How does the board informal hierarchy improve corporate ESG? Evidence from China

Purpose This study aims to re-classify the types of environmental, social and governance (ESG) into ESG performance and ESG information disclosure from the perspective of “words” and “deeds.” Additionally, it also aims to investigate empirically the internal mechanism of board informal hierarchy influencing enterprise’s ESG, and to explore the heterogeneity of this effect under varying corporate governance settings. Design/methodology/approach This study applies fixed effects models and empirically tests the hypotheses using samples of Chinese A-share listed companies from 2011 to 2021. Findings The results of this study suggest that the board informal hierarchy is positively correlated with both the corporate ESG performance and the quality of corporate ESG information disclosure. This conclusion remains reliable after undergoing a series of robustness tests. Heterogeneity analysis indicates that the impact of the board informal hierarchy on ESG varies significantly across companies with different characteristics such as corporate secretary competence, external pay disparity, second-type agency conflicts, ESG pressure and environmental sensitivity. By enhancing the company’s adherence to ESG responsibilities, the board informal hierarchy can ultimately reduce financial constraints on the company. Originality/value In contrast to previous research, this study separates ESG performance from ESG information disclosure, providing a clearer understanding of these elements within corporate ESG practices. Furthermore, this study delves into the influencing factors and economic outcomes associated with the relationship between board informal hierarchy and corporate ESG, thereby expanding the scope of existing research.