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Does privatization hurt ESG? The role of state-owned imprinting

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  • Mou, Saiya
  • Wang, Xinquan
  • Hu, Feng

Abstract

Privatization is widely regarded as a strategy to improve corporate financial performance and stimulate economic growth. However, its non-market outcomes, particularly regarding environmental, social, and governance (ESG) performance, remain underexplored. This study investigates how privatization affects ESG performance. We argue that privatization detaches the responsibility associated with ownership origins, allowing firms to refocus on economic goals and reduce political and social constraints. As a result, financial performance may improve at the expense of ESG performance. Using data from 1635 Chinese listed firms and 5006 firm-year observations, we find that privatization boosts financial performance but adversely affects ESG performance, especially governance performance. We further show that the legacy effects of state ownership are contingent: individual-level imprints (i.e., executives and employees) weaken the impact of privatization, while organizational-level imprints strengthen it. These findings offer new insights into the non-economic consequences of privatization and provide policy implications for determining which types of state-owned enterprises to privatize to better balance financial and ESG goals.

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  • Mou, Saiya & Wang, Xinquan & Hu, Feng, 2025. "Does privatization hurt ESG? The role of state-owned imprinting," Energy Economics, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:eneeco:v:151:y:2025:i:c:s014098832500773x
    DOI: 10.1016/j.eneco.2025.108946
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