Corporate ESG performance and manager misconduct: Evidence from China

Exploring the motivation of corporate ESG (Environment, Social Responsibility, and Corporate Governance) engagement is vital for shareholders protection and corporate sustainable growth. Using a sample of Chinese public listed firms from 2010 to 2020, we study this issue from the manager's misconduct behavior perspective. We find that the quality of ESG engagement significantly inhibits manager misconduct. This relationship is mediated through analyst coverage, and is more pronounced in firms with lower information transparency, firms with lower institutional shareholdings, and firms that voluntarily disclosed ESG information. Our results still hold after a series of robustness checks and addressing potential endogeneity issues, including using the intensity of Confucian culture as an instrumental variable.