Can Removing Policy Burdens Improve SOEs’ ESG Performance? Evidence from China

Abstract

Against the backdrop of the global sustainable development agenda and deepening reforms of China’s state-owned enterprises (SOEs), the restrictive effect of policy burdens on the long-term development capacity of SOEs has become increasingly prominent. How to break this constraint through policy reforms has become critical. This study takes China’s policy on the transfer of heating, power, water supply, and estate in the residential quarters of SOE employees (HPWET) as a quasi-natural experiment. Employing data from 2012 to 2024 on Chinese A-share SOEs listed in Shanghai and Shenzhen, combined with the staggered difference-in-differences method, to explore the impact of removing policy burdens (RPB) on the ESG performance of SOEs and the underlying mechanisms. Results show that RPB significantly improves SOEs’ ESG performance, with an average increase of 14.2% in the ESG performance of SOEs in the treatment group. This effect is more pronounced in large SOEs, those in regions with higher levels of technology marketization, and SOEs in light-pollution industries. Mechanism tests indicate that the improvement of the green innovation level, the reduction in political connections, and the optimization of the corporate governance environment are the core paths of action. This study further broadens the research perspective on SOE policy burdens, enriches the understanding of macro-policy drivers of the ESG performance, and provides new empirical evidence for emerging economies to break through the bottleneck of ESG development in SOEs through institutional reforms.