Impact of smart city policy on environmental, social, and governance performance of enterprises in China

Based on the data of listed companies in China’s A-share market, this paper takes the smart city policy as a quasi-natural experiment and employs the progressive difference-in-differences (DID) model and the mediation model to investigate the influence effect and mechanism of the smart city policy on the environmental, social, and governance (ESG) performance of enterprises. The research reveals that the smart city policy can significantly enhance the ESG performance of local enterprises, and this conclusion remains valid after a series of robustness tests. The mechanism test indicates that the smart city policy mainly improves the ESG performance of enterprises by alleviating financing constraints and promoting green innovation, and the facilitating effect of the smart city policy is more pronounced in enterprises with stronger managerial capabilities. Additionally, the smart city policy has a more substantial impact on improving the ESG performance of enterprises in the eastern region, those in non-heavy pollution industries, non-state-owned enterprises, small-scale enterprises, and profitable enterprises. There is no “greenwashing” phenomenon in the ESG performance of Chinese enterprises, which provides enlightenment for the subsequent development direction of the smart city policy. Based on the above findings, this paper proposes policy recommendations such as actively responding to the smart city policy, alleviating financing constraints, accelerating the green innovation of enterprises, enhancing the managerial capabilities of enterprises, and differentially stimulating the ESG development of enterprises. This paper provides theoretical support and empirical evidence from the perspective of the smart city policy for enhancing the ESG performance of enterprises and expanding the development paths of ESG.