The Sectoral and Regional Peer Influences on Heavy-Pollution Corporate Environmental, Social, and Governance Performance

The conception of environmental, social, and governance (ESG) performance has been widely implemented and has become an important indicator of firms’ eco-friendly transformation in heavy-pollution industries. The sectoral and regional peer influences of corporate ESG performance can effectively promote firms’ green sustainable development within an entire industry, district, and market. In this study, our main hypothesis is that corporate ESG performance has a significantly positive peer effect among heavy-pollution industry firms within the same province, industry, and product market. Therefore, by employing novel spatial econometric techniques, we investigate the peer effect of corporate ESG performance among 681 of China’s A-share listed firms within 20 heavy-pollution industries from 2012 to 2021 and explore the impacts from peer indirect effect views, such as public media attention, regulatory pressure, and green innovation. Further, we detect the sectoral and regional peer pulling and dragging effects under the two statuses of firms’ ESG rating changes. The main findings are as follows. First, corporate ESG performance has a significantly positive peer effect, which is the highest among firms within the same industry. Second, the mechanism analysis presents that the increase in other firms’ negative web news, environment-related penalties, and green patents has different peer indirect effects on corporate ESG performance within the same province, industry, and product market. Third, corporate ESG performance has a significantly positive peer-pulling effect among firms when other firms’ ESG levels increase, yet a significantly positive peer-dragging effect only within the same region and industry when other firms’ ESG levels decrease. This study gives empirical contributions that firms can take advantage of the positive peer effect of corporate ESG performance to improve their own ESG practice level and employ it as a competitive strategy for pursuing long-term value, and governments should maintain sustainable supervision measures and an orderly competitive market environment to cultivate a consensus on corporate ESG development in heavy-pollution industries.