The new environmental protection law, political connections and corporate ESG performance

Using a difference-in-difference approach based on micro-level environmental, social, and governance (ESG) performance data from Chinese companies, this study explores the impact of the New Environmental Protection (NEP) Law implementation on their ESG performance. Findings show that implementing the NEP Law significantly and positively improves the ESG performance of heavily polluting enterprises. Furthermore, political relationships among senior executives have a significant positive moderating effect on the relationship between the NEP Law implementation and corporate ESG performance. Heterogeneity tests, the NEP Law has a more pronounced effect on enhancing the ESG performance of state-owned enterprises. The NEP Law significantly improves the ESG performance capabilities of firms in eastern regions, whereas its incentive effect on enterprises in central and western regions is not significant.