Does the ‘Little Giant’ label improve corporate ESG performance?

Using data on Chinese listed firms from 2011 to 2023, we examine whether designation as a Specialized, Refined, Distinctive, and Innovative (SRDI) ‘Little Giant’ firm improves corporate ESG performance. Exploiting the staggered rollout of the programme in a difference-in-differences framework, we find that designated firms experience higher ESG scores after designation. Mechanism tests suggest that the label operates mainly by easing financing constraints, strengthening reputation incentives, and increasing media scrutiny. The policy effect is more pronounced among non-state-owned enterprises (non-SOEs), firms in heavily polluting industries, and firms located in regions with stricter environmental regulation. The findings suggest that an industrial policy aimed at technological upgrading may also generate sustainability gains.