Transfer of control rights and corporate sustainability performance: evidence from state-owned enterprises in China

Purpose This study aims to examine the effect of control transfer in state-owned enterprises (SOEs) on corporate sustainability performance (CSP) amid China’s mixed-ownership reform. Design/methodology/approach This study uses a large sample of Chinese listed companies from 2003 to 2020. Using China’s mixed-ownership reform as a quasi-natural experiment, the authors use a staggered difference-in-differences model to investigate how control transfers in SOEs affect both financial and non-financial CSP. Findings The findings show that control transfers enhance financial CSP while reducing non-financial CSP. Mechanism analysis suggests that financial sustainability improves due to lowered policy burdens, whereas increased environmental, social and governance incidents contribute to weaker non-financial sustainability. Heterogeneity tests indicate stronger effects in firms with full state capital withdrawal and highly competitive SOEs. Originality/value This study advances understanding of how ownership structures affect both financial and non-financial aspects of corporate sustainability. It offers insights into the benefits and costs of control transfers in SOEs and presents a new perspective on the roles of state versus private ownership in promoting corporate sustainability. The findings have policy implications for privatization reform in China and other countries, as well as for the United Nations Sustainable Development Goals.