Organizational Responses to Regional Carbon Emissions Trading: Multidimensional ESG Evidence From Chinese State‐Owned Enterprises

ABSTRACT Using China's staggered regional carbon emissions trading (CET) pilots as a quasi‐natural experiment, this study examines organizational responses to regional CET exposure and patterns of multidimensional ESG adjustment among listed state‐owned enterprises (SOEs). Based on 13,750 firm‐year observations from 2010 to 2023, we estimate a staggered difference‐in‐differences model. Regional CET exposure is associated with a 0.764‐point increase in ESG scores, equivalent to 0.16 standard deviations. It is also positively associated with green technological innovation and internal control quality, providing evidence consistent with technological adaptation and governance and compliance adaptation. Pillar‐level estimates indicate uneven adjustment: the environmental effect is positive but modest, the social effect is not statistically detectable, and the governance pillar has the largest and most precise estimate. The ESG effect is stronger at higher levels of capital intensity, R&D investment, and executive compensation incentives, and differs significantly across high‐ and low‐carbon industries and by Managerial Formal Political Connections (MPC).