Peer Effects on ESG Disclosure: Drivers and Implications for Sustainable Corporate Governance

Amid growing global concerns regarding sustainable governance, understanding the drivers of ESG disclosure is vital for promoting transparency and responsible corporate behavior. This study examines the peer effects of ESG disclosure among 32,187 observations from Chinese A-share listed firms between 2010 and 2021. This research employs an instrumental variable approach based on stock-specific idiosyncratic returns estimated via the Carhart four-factor model to address endogeneity concerns. The results confirm significant peer effects, suggesting that firms adjust ESG practices in response to their industry counterparts. These effects are significantly moderated by firm-level characteristics, including information asymmetry, corporate reputation, and market competition, as well as by external conditions such as economic policy uncertainty, business environment volatility, and institutional quality. This research defines peer groups by industry affiliation and conducts robustness tests using ESG risk clustering to address classification bias. This study contributes to the literature by strengthening causal inference and refining the understanding of peer-driven ESG behavior by integrating institutional theory, signaling theory, and information economics. The findings offer practical implications for policymakers, investors, and corporate managers seeking to promote ESG convergence through peer-driven incentives in diverse regulatory contexts.