The impact of government environmental attention on firms’ ESG performance: Evidence from China

Environmental, Social, and Governance (ESG) have been globally recognized as a pivotal driving force for achieving sustainable development goals. Extant studies have mainly focused on exploring its economic consequences, while evidence on how the public sector, especially local government, affects enterprises' ESG performance is scarce. By manually extracting environment-related textual information from 2011 to 2020 urban government work reports, we quantify government environmental attention (GEA) and explore its impact on firms' ESG performance. The result indicates that an increase in GEA enhances firms' ESG performance. We confirm this finding using a range of robustness checks. Our mechanism analysis shows that GEA facilitates firms' ESG performance by altering three environmental-related firm behaviors: green investment, environmental governance information disclosure, and green technology innovation. Heterogeneity analysis demonstrates that this positive effect differs in firm ownership, CEO experience, and factor intensity. Our findings provide insight for policymakers to propel firms to undertake more social responsibility.