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Market competitiveness and corporate ESG performance

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  • Zhang, Taotao
  • Qin, Chuan
  • Lu, Zhaoying

Abstract

This study investigates the relationship between firm-level market competitiveness and corporate environmental, social, and governance (ESG) performance, with a particular focus on the underlying mechanisms and moderating factors influencing this association. Using panel data from Chinese A-share listed firms, we find robust evidence that firms with higher market competitiveness, measured by branch network extensiveness, exhibit superior ESG performance. Empirical analysis further identifies resource allocation efficiency as a significant mediator: firms facing greater competitive pressure allocate resources more efficiently, which in turn positively affects ESG outcomes. Additionally, green innovation emerges as an important moderator, substantially enhancing the positive relationship between market competitiveness and ESG performance. Further heterogeneity analyses reveal nuanced patterns: the beneficial effects of competitiveness on ESG performance are more pronounced for larger firms, privately-owned enterprises, and those located in economically developed eastern regions. Notably, competitive pressures influence ESG dimensions differently, exerting the strongest positive effects on social performance, moderate impacts on governance performance, and no significant effect on environmental performance. Collectively, these findings highlight that market competitiveness generally promotes corporate sustainability, yet the extent and nature of this relationship vary according to firm characteristics, ownership structures, regional contexts, and ESG dimensions. This study provides comprehensive insights for policymakers and managers on leveraging competitive market environments to foster sustainable business practices.

Suggested Citation

  • Zhang, Taotao & Qin, Chuan & Lu, Zhaoying, 2025. "Market competitiveness and corporate ESG performance," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003648
    DOI: 10.1016/j.iref.2025.104201
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