Can ETFs improve corporate ESG performance? Evidence from China

This study examines the impact of ETF ownership on corporate ESG performance using data from listed companies in China’s A-share market from 2011 to 2023. The results show that ETF ownership significantly enhances firms’ ESG performance, and this conclusion holds under a series of endogeneity and robustness checks. Further analysis reveals that ETF-induced increase in firm visibility and disclosure contributes to improved ESG performance, suggesting that ETF ownership promotes ESG outcomes by strengthening external monitoring mechanisms. This study not only enriches the literature on the impact of ETFs on corporate behaviour, but also provides support for how regulatory bodies might leverage ETF products to promote corporate sustainability.