State-owned shareholders’ participation and strategic ESG behavior of private enterprises: evidence from China

Purpose This paper aims to investigate how state-owned shareholders’ equity participation affects the strategic environmental, social and governance (ESG) behavior of private enterprises, aiming to provide suggestions for private enterprises to govern strategic ESG behavior. Design/methodology/approach Using a sample of China’s A-share nonfinancial listed private enterprises from 2009 to 2024, this paper uses multiple regression analysis to explore the impact of state-owned shareholders’ equity participation on the strategic ESG behavior of private enterprises. Findings The results present that the participation of state-owned shareholders may inhibit the strategic ESG behavior of private companies. Mechanism test results show that, on the one hand, state-owned shareholder participation exerts an internal governance effect by curbing the second type of agency costs, thereby restraining the strategic ESG behaviors of private enterprises; on the other hand, state-owned shareholder participation generates an external supervision effect by raising media attention and analyst attention, which further inhibits private firms’ strategic ESG engagement. The heterogeneous analysis based on the internal characteristics of private companies shows that state-owned shareholders’ participation exerts a stronger inhibitory effect on the strategic ESG behavior of private companies with no political connections than on those with political connections. Based on the heterogeneity analysis of the external governance environment, it is found that state-owned shareholders’ equity participation has a stronger inhibitory effect on the strategic ESG behavior of private enterprises located in regions with stronger environmental regulation intensity and higher public environmental attention. Originality/value First, this paper examines the regulatory function of reverse mixed ownership reform in shaping strategic ESG behavior among private firms from the perspective of state capital equity injection, thereby offering new insights into the governance of such behavior. Second, based on the perspective of “reverse mixed ownership reform,” this paper examines the influence of state capital shareholdings on corporates’ nonfinancial performance, which delivers valuable complementary evidence to existing literature on evaluating the practical effects of mixed ownership reform.