Informal Environmental Regulation and Corporate ESG Performance: The Dual Paths of Green Innovation

This study investigates the role of informal environmental regulations (IER) on corporate Environmental, Social, and Governance (ESG) performance, particularly in China’s heavy-polluting industries. Drawing on neo-institutional theory, this study employs a comprehensive panel dataset of China’s A-share listed firms from 2011 to 2020 to explore how potent societal forces that shape corporate behavior beyond formal regulatory frameworks. This study also examines the dual impact of substantive and symbolic green innovations as moderating variables in the relationship between IER and corporate ESG performance. Findings indicate that IER is positively related to corporate ESG performance, and both types of green innovations enhance ESG performance, with substantive innovations showing a stronger effect. This suggests that genuine technological and process advancements align corporate practices with societal expectations more effectively than symbolic actions, which primarily manage public perception. The study enriches the theoretical discourse on neo-institutional theory by demonstrating how informal pressures complement formal regulations, urging firms toward more robust sustainability practices.