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The paradox of government-guided funds: A negative impact on corporate ESG performance?!

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  • Zhang, Xubo
  • Zhang, Xinyu
  • Tu, Yanbin

Abstract

This paper examines the relationship between government-guided fund (GGF) investment and corporate ESG (Environmental, Social, and Governance) performance using China's A-share companies that received GGFs from 2013 to 2022. Our analysis indicates a significant negative correlation between GGFs holdings and ESG performance, with one period lagged effect. This negative correlation is pronounced for non-state-owned enterprises but insignificant for state-owned enterprises. For state-owned enterprises, robust regional economic development and stringent environmental regulations mitigate the negative GGF correlation. This study provides new insights into the relation of GGFs with corporate sustainability.

Suggested Citation

  • Zhang, Xubo & Zhang, Xinyu & Tu, Yanbin, 2025. "The paradox of government-guided funds: A negative impact on corporate ESG performance?!," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001643
    DOI: 10.1016/j.frl.2025.106900
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    1. Zuo, Yuanheng & Yi, Yuhuan, 2025. "Government guidance funds and state-owned enterprise merger and acquisition performance: The role of government-business relations," International Review of Financial Analysis, Elsevier, vol. 108(PA).
    2. Ji, Duan & Liu, Ming & Li, Dan & Fan, Hong & Zhan, Feng, 2025. "Hidden costs of government-guided funds: Evidence from executive-employee pay gaps," Finance Research Letters, Elsevier, vol. 86(PB).

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