Research on the impact of semi-mandatory ESG disclosure system on corporate green innovation

• First proof: Semi-mandatory ESG boosts green innovation. • Drives innovation via eased financing, better data, and more R&D. • Based on the legitimacy perspective and neoinstitutional theory. • Stronger boost for SOEs, heavy polluters, and high-tech firms. Environmental, Social, and Governance (ESG) serves as a core practical framework for sustainable development, systematically shaping corporate green economic behaviors. Grounded in neo institutional theory, this study empirically examines the policy effects of semi-mandatory ESG disclosure system using a difference-in-differences (DID) model with a sample of China's A-share listed companies from 2017 to 2023. The findings reveal that such institutional pressure drives corporate green innovation through a tripartite mechanism: alleviating financing constraints, enhancing information disclosure quality, and expanding R&D investment. Heterogeneity analysis further demonstrates significantly amplified effects among state-owned enterprises, enterprises in eastern and western regions, heavy-polluting industries, and technology-intensive firms. Further analysis reveals the positive impact of green innovation on corporate product competitiveness and confirms that green innovation can serve as a moderating effect, mitigating the negative impact of semi-mandatory ESG disclosure requirements on the corporate status of listed companies. This study aims to provide practical insights into semi-mandatory ESG disclosure frameworks for capital markets in the early stages of ESG institutional development. It seeks to ensure policy effectiveness while facilitating a steady transition toward comprehensive mandatory disclosure. Additionally, the research explores how institutional pressure influences corporate green innovation decisions, offering actionable guidance for businesses navigating semi-mandatory ESG disclosure requirements.