Does ESG performance enhance the financial performance and valuation of Chinese private enterprises? The moderating role of political connection and state ownership

Drawing on the theory of the firm perspective on corporate social responsibility (CSR), this study investigates how the mechanisms of political control moderate the relationship between the environmental, social, and governance (ESG) performance and the financial performance and valuation of Chinese private enterprises. Chinese governments maintain control over private enterprises through mechanisms such as having former public officials in the top management and maintaining partial ownership over the enterprises. We analysed a sample of 2,926 Chinese private enterprises from 2013 to 2021 and found that the CEO's political connection and state ownership share negatively moderate the positive impact of ESG performance on the firm's financial performance and valuation. This study thereby highlights an important contextual moderator of the relationship between CSR and firm performance – political control.