Environmental Judicial Reform and Corporate ESG Performance: Evidence from a Quasi-Natural Experiment of the Establishment of Intermediate Environmental Courts in China

Sustainable development has become a defining feature of China’s development in the new era. Taking the establishment of specialized environmental courts as a quasi-natural experiment, this study asks whether environmental judicial reform improves corporate ESG performance and, if so, under which conditions the effect is strongest. Using Chinese A-share listed companies over the period 2010–2024 and a staggered difference-in-differences design, the analysis shows that the establishment of environmental courts raises corporate ESG performance, and that the estimated effect is robust to a doubly robust staggered estimator that is not subject to the biases of conventional two-way fixed-effects specifications. The effect is conditional rather than uniform. It is stronger where judicial deterrence actually binds—among firms with higher environmental penalty amounts and a greater number of environmental penalties—and where firms’ capacity to absorb compliance pressure is greater—among firms with higher internal control quality and stronger environmental performance. The improvement is concentrated in the environmental (E) and governance (G) dimensions, with no significant effect on the social (S) dimension, and it is accompanied by lower disagreement among ESG rating agencies. This pattern points to targeted, compliance-driven adjustment under judicial pressure rather than a broad transformation into more socially responsible firms. Further analysis links the improvement in ESG performance to greater corporate innovation and better regional atmospheric diffusion conditions, indicating positive ecological externalities. These findings inform the design of environmental judicial institutions and the promotion of high-quality corporate ESG development.