IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v202y2026ics0148296325005983.html

The ESG-productivity paradox: how ESG performance expectation gaps impede total factor productivity

Author

Listed:
  • Dong, Xiaonan

Abstract

Despite extensive studies on expectation gaps in financial performance, the impact of ESG performance expectation gaps (ESGNGAP) remains underexplored. Based on data from Chinese listed manufacturers (2011–2023), this study examines how ESGNGAP affect firms’ total factor productivity (TFP), offering novel insights into the non-financial drivers of productivity. The findings demonstrate that larger ESGNGAP significantly reduce TFP by intensifying hidden executive corruption (exemplified by excessive on-the-job consumption) and weakening green innovation. This negative effect is mitigated by firms’ digital transformation, executives’ environmental backgrounds, and regional fintech development. Additional analysis reveals that the impact of ESGNGAP on productivity varies across ownership structures and industries. This study enriches the ESG performance feedback literature by revealing the effects of ESGNGAP on productivity.

Suggested Citation

  • Dong, Xiaonan, 2026. "The ESG-productivity paradox: how ESG performance expectation gaps impede total factor productivity," Journal of Business Research, Elsevier, vol. 202(C).
    • Handle: RePEc:eee:jbrese:v:202:y:2026:i:c:s0148296325005983
    DOI: 10.1016/j.jbusres.2025.115775
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296325005983
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2025.115775?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Ting Liu & Xuejiao Cao, 2025. "RETRACTED ARTICLE: Going Green: How Executive Environmental Awareness and Green Innovation Drive Corporate Sustainable Development," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 6577-6604, June.
    2. Yang, Xiangyang & Li, Zijun & Qiu, Zhaoxuan & Wang, Jinmin & Liu, Bei, 2024. "ESG performance and corporate technology innovation: Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 206(C).
    3. Shuntian Yao, 2002. "Privilege and Corruption: The Problems of China's Socialist Market Economy," American Journal of Economics and Sociology, Wiley Blackwell, vol. 61(1), pages 279-299, January.
    4. Liu, Xiangqiang & Yang, Qingqing & Wei, Kai & Dai, Peng-Fei, 2024. "ESG rating disagreement and idiosyncratic return volatility: Evidence from China," Research in International Business and Finance, Elsevier, vol. 70(PB).
    5. Zhang, Dongyang, 2023. "Can digital finance empowerment reduce extreme ESG hypocrisy resistance to improve green innovation?," Energy Economics, Elsevier, vol. 125(C).
    6. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    7. He, Jie (Jack) & Huang, Jiekun & Zhao, Shan, 2019. "Internalizing governance externalities: The role of institutional cross-ownership," Journal of Financial Economics, Elsevier, vol. 134(2), pages 400-418.
    8. Song, Malin & Peng, Licheng & Shang, Yuping & Zhao, Xin, 2022. "Green technology progress and total factor productivity of resource-based enterprises: A perspective of technical compensation of environmental regulation," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    9. Quan, Xiaofeng & Zhang, Ke & Zhong, Rui & Zhu, Yuxiang, 2023. "Political corruption and green innovation," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    10. Jensen, Michael C. & Meckling, William H., 2008. "Theory of the firm: managerial behavior, agency costs and ownership structure," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 48(2), April.
    11. Guo, Xiaochuan & Li, Mengmeng & Wang, Yanlin & Mardani, Abbas, 2023. "Does digital transformation improve the firm’s performance? From the perspective of digitalization paradox and managerial myopia," Journal of Business Research, Elsevier, vol. 163(C).
    12. Zijie Li & Xiangnan Liu & Lingfeng Xu & Qun Wu, 2025. "Classification and spatial characteristics of different development stages in China: Evidence from the contribution rate of production factors," PLOS ONE, Public Library of Science, vol. 20(1), pages 1-19, January.
    13. Timothy B. Palmer & Robert M. Wiseman, 1999. "Decoupling risk taking from income stream uncertainty: a holistic model of risk," Strategic Management Journal, Wiley Blackwell, vol. 20(11), pages 1037-1062, November.
    14. Eliana La Ferrara & Alberto Chong & Suzanne Duryea, 2012. "Soap Operas and Fertility: Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 4(4), pages 1-31, October.
    15. Hongbin Cai & Hanming Fang & Lixin Colin Xu, 2011. "Eat, Drink, Firms, Government: An Investigation of Corruption from the Entertainment and Travel Costs of Chinese Firms," Journal of Law and Economics, University of Chicago Press, vol. 54(1), pages 55-78.
    16. Jessica Hermawan & Liliana Inggrit Wijaya & Andri Rianawati, 2025. "Environmental, social and governance trends in Asian firms: a systematic review and bibliometric analysis using the antecedents-decisions-outcomes–theories-context-methods framework," Cogent Business & Management, Taylor & Francis Journals, vol. 12(1), pages 2525531-252, December.
    17. Wu, Bao & Ren, Kangjun & Fu, Yao & He, Defeng & Pan, Mengmeng, 2024. "Institutional investor ESG activism and green supply chain management performance: Exploring contingent roles of technological interdependences in different digital intelligence contexts," Technological Forecasting and Social Change, Elsevier, vol. 209(C).
    18. Tu, Qiang & Zuo, Limei & Liang, Anran & Yao, Ye & Liu, Diyi, 2025. "Does ESG rating divergence decrease enterprise productivity? Evidence from China," Research in International Business and Finance, Elsevier, vol. 77(PB).
    19. Jin, Yu & Ma, Yuan-Yuan & Yuan, Li-Bin, 2024. "How does digital finance affect the total factor productivity of listed manufacturing companies?," Structural Change and Economic Dynamics, Elsevier, vol. 71(C), pages 84-94.
    20. Iftekhar Hasan & Nada Kobeissi & Liuling Liu & Haizhi Wang, 2018. "Corporate Social Responsibility and Firm Financial Performance: The Mediating Role of Productivity," Journal of Business Ethics, Springer, vol. 149(3), pages 671-688, May.
    21. Riadh Manita & Najoua Elommal & Patricia Baudier & Lubica Hikkerova, 2020. "The digital transformation of external audit and its impact on corporate governance," Post-Print hal-04314467, HAL.
    22. Yubin Wu & Fu’an Shi & Yongyu Wang, 2024. "Driving Impact of Digital Transformation on Total Factor Productivity of Corporations: The Mediating Effect of Green Technology Innovation," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(5), pages 950-966, April.
    23. Sun, Haibo & Han, Fangyuan & Liu, Zhonglu, 2024. "Does executive environmental protection experience reduce enterprise energy consumption intensity?," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 652-666.
    24. Demir, Firat & Hu, Chenghao & Liu, Junyi & Shen, Hewei, 2022. "Local corruption, total factor productivity and firm heterogeneity: Empirical evidence from Chinese manufacturing firms," World Development, Elsevier, vol. 151(C).
    25. Gao, Yongqiang & Yang, Haibin & Zhang, Miaohan, 2021. "Too bad to fear, too good to dare? Performance feedback and corporate misconduct," Journal of Business Research, Elsevier, vol. 131(C), pages 1-11.
    26. Xu, Chao & Sun, Guanglin & Kong, Tao, 2024. "The impact of digital transformation on enterprise green innovation," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 1-12.
    27. Gao, Xiang & He, Xixi & Sun, Chuanwang & Wu, Dongmei & Zhang, Jie, 2025. "Innovation in shouldering green responsibility: ESG performance and green technology innovation," Energy Economics, Elsevier, vol. 142(C).
    28. Li Wang & Hongyu Yang, 2024. "Digital technology innovation and corporate ESG performance: evidence from China," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-32, December.
    29. Cheng, Xuanmei & Teng, Fangfei & Lucey, Brian M. & Du, Anna Min & Li, Chengnan, 2025. "Experience and cautious decision-making: Executive green background, environmental investment, and informal institutions," International Review of Financial Analysis, Elsevier, vol. 103(C).
    30. Kangqi Jiang & Jie Zhang & Mengling Zhou & Zhongfei Chen, 2025. "ESG disagreement and corporate debt maturity: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-39, December.
    31. Luo, Wei & Zhang, Yi & Zhu, Ning, 2011. "Bank ownership and executive perquisites: New evidence from an emerging market," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 352-370, April.
    32. Muhammad Ansar Majeed & Tanveer Ahsan & Ammar Ali Gull, 2024. "Does corruption sand the wheels of sustainable development? Evidence through green innovation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4626-4651, July.
    33. Pino G. Audia & Henrich R. Greve, 2006. "Less Likely to Fail: Low Performance, Firm Size, and Factory Expansion in the Shipbuilding Industry," Management Science, INFORMS, vol. 52(1), pages 83-94, January.
    34. Manita, Riadh & Elommal, Najoua & Baudier, Patricia & Hikkerova, Lubica, 2020. "The digital transformation of external audit and its impact on corporate governance," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    35. Deb, Palash & David, Parthiban & O'Brien, Jonathan P. & Duru, Augustine, 2019. "Attainment discrepancy and investment: Effects on firm performance," Journal of Business Research, Elsevier, vol. 99(C), pages 186-196.
    36. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    37. Qin, Lu & Aziz, Ghazala & Hussan, Muhammad Wasim & Qadeer, Afifa & Sarwar, Suleman, 2024. "Empirical evidence of fintech and green environment: Using the green finance as a mediating variable," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 33-49.
    38. Dyck, Alexander & Lins, Karl V. & Roth, Lukas & Wagner, Hannes F., 2019. "Do institutional investors drive corporate social responsibility? International evidence," Journal of Financial Economics, Elsevier, vol. 131(3), pages 693-714.
    39. Zhu, Caijie & Zhang, Luyao & Yu, Shuai & Hao, Lizhong, 2025. "Research on the relationship between corporate philanthropy and executive hidden corruption," International Review of Economics & Finance, Elsevier, vol. 103(C).
    40. Meng, Li & Su, Taoyong & Zhang, Jintao, 2024. "Environmental performance shortfalls and corporate green innovation: The role of green credit regulation," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    41. Xiaonan Dong & Sungjin Son & Taewoo Roh, 2025. "Strategic Linkages to ESG Performance: The Role of Performance Measurement System and Psychological Empowerment," Business Strategy and the Environment, Wiley Blackwell, vol. 34(4), pages 4372-4391, May.
    42. Geng, Yini & Zheng, Zhiqiang & Yuan, Xuemei & Jiménez-Zarco, Ana Isabel, 2025. "ESG performance and total factor productivity of enterprises: the role of digitization," Research in International Business and Finance, Elsevier, vol. 77(PA).
    43. Lu, Jiankun & Zhang, Hongsheng & Meng, Bo, 2021. "Corruption, firm productivity, and gains from import liberalization in China," Economic Modelling, Elsevier, vol. 101(C).
    44. Ziyuan Sun & Xiao Sun & Lihong Wang & Wei Wang, 2025. "Substantive transformation or strategic response? The impact of a negative social responsibility performance gap on green merger and acquisition of heavily polluting firms," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 68(6), pages 1238-1262, May.
    45. Ren, Xiaohang & Zhang, Xiao & Yan, Cheng & Gozgor, Giray, 2022. "Climate policy uncertainty and firm-level total factor productivity: Evidence from China," Energy Economics, Elsevier, vol. 113(C).
    46. Ziyuan Sun & Xiao Sun & Wenjiao Wang & Wei Wang, 2025. "Digital transformation and greenwashing in environmental, social, and governance disclosure: Does investor attention matter?," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 34(1), pages 81-102, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hamza Nizar & Taher Hamza & Faten Lakhal, 2024. "How does institutional cross‐ownership affect firm productivity? The importance of the corporate social responsibility channel," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1988-2010, April.
    2. Dang, Tam Hoang-Nhat & Balli, Faruk & Balli, Hatice Ozer & Nguyen, Hannah, 2024. "Firm productivity in the Energy-electricity sector over the last two decades with crisis: The role of cross-listing," Energy Economics, Elsevier, vol. 130(C).
    3. Yifan Zhan & Hung-Gay Fung & Wai Kin Leung, 2024. "Perk consumption and CEO turnover," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1525-1568, May.
    4. Wang, Hong & Hu, Xuechen & Li, Hailing, 2023. "Regional production restriction policy and firms’ green transition: Evidence from Beijing-Tianjin-Hebei region," Energy, Elsevier, vol. 282(C).
    5. Gao, Xiang & He, Xixi & Sun, Chuanwang & Wu, Dongmei & Zhang, Jie, 2025. "Innovation in shouldering green responsibility: ESG performance and green technology innovation," Energy Economics, Elsevier, vol. 142(C).
    6. Luo, Mingjin & Wang, Shengquan, 2026. "Behind booms: the digitalization of underperforming Chinese companies," Journal of Business Research, Elsevier, vol. 206(C).
    7. Liu, Huan & Hou, Canran, 2023. "The external effect of institutional cross-ownership on excessive managerial perks," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 483-501.
    8. Taher Hamza & Hamza Nizar & Faten Lakhal, 2025. "Corporate social responsibility, industry competition and firm productive efficiency: evidence from semi-parametric and non-parametric analysis," Annals of Operations Research, Springer, vol. 347(1), pages 553-578, April.
    9. Yang, Haiyan & Tang, Feier & Hu, Fang & Yao, Daifei, 2025. "Corporate ESG performance and abnormal cash dividends," International Review of Financial Analysis, Elsevier, vol. 102(C).
    10. Xiaoyang Guo & Xiuwu Zhang & Jingyi Yang & Jiangying Wei & Takashi Tamamine & Jiayuan Lin & Weijun Hu, 2025. "Digital transformation, entrepreneurship and total factor productivity of enterprises——empirical evidence from listed companies," International Entrepreneurship and Management Journal, Springer, vol. 21(1), pages 1-40, December.
    11. Weili Li, 2025. "RETRACTED ARTICLE: Optimizing Enterprise Productivity in the Digital Economy: A Genetic Algorithm and Multi-Objective Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 2670-2688, March.
    12. Al-Shaer, Habiba & Uyar, Ali & Kuzey, Cemil & Karaman, Abdullah S., 2023. "Do shareholders punish or reward excessive CSR engagement? Moderating effect of cash flow and firm growth," International Review of Financial Analysis, Elsevier, vol. 88(C).
    13. Alona Bilokha & Sudip Gupta, 2024. "Shareholder litigation rights and firm productivity," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 33(2), pages 65-90, May.
    14. Jin, Shaorong & Xiong, Ruoyu & Peng, Huan & Tang, Shiyu, 2025. "ESG performance and private enterprise resilience: Evidence from Chinese financial markets," International Review of Financial Analysis, Elsevier, vol. 98(C).
    15. Pan, Xiaofei & Tian, Gary Gang, 2015. "Does banks’ dual holding affect bank lending and firms’ investment decisions? Evidence from China," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 406-424.
    16. Fang, Xubing & Liu, Maotao, 2024. "Regional judicial capacity and corporate total factor productivity: Evidence from the establishment of circuit courts," Structural Change and Economic Dynamics, Elsevier, vol. 71(C), pages 465-489.
    17. Suo, Xuekun & Zhang, Longting & Guo, Rong & Lin, Han & Yu, Mingchuan & Du, Xiuhong, 2024. "The inverted U-shaped association between digital economy and corporate total factor productivity: A knowledge-based perspective," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    18. Zhao, Wenzhuo & Qin, Luohan & Zhao, Yali & Zuo, Jingjing, 2024. "Social media coverage and perk consumption: Agency view or efficiency view?," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1058-1073.
    19. Kyriacou, Kyriacos & Liu, Siming & Mase, Bryan, 2024. "Corruption and insider trading," Journal of Corporate Finance, Elsevier, vol. 89(C).
    20. Shao, Yanmin & Xu, Kunliang & Shan, Yuan George, 2024. "Leveraging corporate digitalization for green technology innovation: The mediating role of resource endowments," Technovation, Elsevier, vol. 133(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:202:y:2026:i:c:s0148296325005983. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.