ESG Rating and Green Innovation of Manufacturing Enterprises: Based on the Regulatory Role of Environmental Regulation and Market Competition

Yue Yu; Xiangfeng Zeng

doi:10.6981/FEM.202510_6(10).0016

Authors

Yue Yu
Xiangfeng Zeng

DOI:

https://doi.org/10.6981/FEM.202510_6(10).0016

Keywords:

ESG Rating; Green Innovation; Environmental Regulation; Market Competition; Manufacturing Enterprises; Moderating Effect.

Abstract

Under the guidance of the "dual carbon" goals leading the comprehensive green transformation of the economy and society, exploring the driving mechanisms of green innovation in manufacturing enterprises holds significant theoretical and practical implications. This paper aims to systematically examine the impact of corporate ESG ratings on their green innovation and test the moderating roles of environmental regulation and market competition. Using Chinese A-share listed manufacturing companies from 2014 to 2023 as research samples, this study constructs a two-way fixed effects model for empirical analysis. The findings reveal: (1) The improvement of corporate ESG ratings can significantly enhance their green innovation levels, a conclusion that remains valid after rigorous tests including lagged variables and exclusion of samples from special periods. (2) Both environmental regulation and market competition play positive moderating roles between ESG ratings and corporate green innovation. Specifically, in environments with higher environmental regulation intensity or fiercer market competition, ESG ratings demonstrate more significant promoting effects on green innovation. (3) Heterogeneity analysis reveals that the promoting effect of ESG on green innovation shows a gradual strengthening trend from eastern to central and western regions. This indicates that in areas with relatively lower marketization levels and more prominent information asymmetry, ESG, as a high-quality reputation signal, exhibits stronger marginal driving effects on corporate green innovation. The study uncovers the "ESG ratings-external context-green innovation" linkage mechanism, providing new empirical evidence for understanding the driving forces of corporate green transformation, and offers important implications for governments to formulate coordinated environmental and industrial policies and guide enterprises toward sustainable development.

Downloads

Download data is not yet available.

References

[1] X.M. Xie, Y.H. Han: How can domestic manufacturing enterprises achieve a "glamorous transformation" through green innovation? --A Case Study Based on the Attention-Based Perspective [J]. Management World, 2022,38(03),p.76-106.

[2] X.M. Fang, D. Hu: Evidence on Corporate ESG Performance and Innovation-- from A-share Listed Companies [J]. Economic Research, 2023,58(02),p.91-106.

[3] W.N. Qin: ESG Performance and Corporate Green Innovation: "Incremental Quality Improvement" -- Based on the Regulatory Role of Environmental Regulations and Market Competition Pressure [J]. Journal of Techno-Economics and Management, 2024(06),p.139-144.

[4] L.H. Yang, R.Y. Jia: Can digital transformation enhance corporate green innovation performance? -- Based on data from A-share listed companies in China [J]. Ecological Economy, 2024,40(03),p.64-74.

[5] J.J. Guo, Y. Fang and Y. Guo: Environmental Regulation, Tolerance of Short-term Failures, and Corporate Green Innovation-- Evidence from Green Credit Policy Practices [J]. Economic Research, 2024,59(03),p.112-129.

[6] S.S. Ba, Y.Y. Xin and Y.Z. Wen: Corporate ESG Ratings and Green Innovation -- From Micro-level Evidence of Listed Companies in China [J]. Journal of Financial Economics Research, 2025,40(01),p.13-25.

[7] J.M. Ye, Y. Li: Does Heterogeneous Environmental Regulation Performance Suppress Corporate Information "Greenwashing" Behavior? [J]. Accounting Monthly, 2020(17),p.39-46.

[8] Y.B. Zhou, Y.H. Duan and X.Z. Huang: "Research on Corporate Green Technology Innovation Behavior under Environmental Regulations: Substantive or Strategic?" [J]. Economic and Management Research, 2025,46(01),p.124-144.

[9] W. Cai, X.L. Zhou: The Dual Effects of China's Environmental Regulation on Green Total Factor Productivity [J]. Journal of Economics, 2017, (09),p.27-35.

[10] Z.Q. Zhang: Environmental Regulation, Product Space Evolution and Enterprise-Oriented Technological Innovation-- Evidence-Based Analysis of Manufacturing Listed Companies [J]. Nankai Economic Research, 2023(03),p.151-172.

[11] W.M. Xie, H.Q. Wei: Market Competition, Organizational Redundancy and Enterprise R&D Investment [J]. China Soft Science, 2016, (08),p.102-111.

[12] C.Y. He, Y. Lu and B. Feng: The Impact of Corporate ESG Performance on Stock Price Volatility -- An Analysis Based on Market Participant Behavior [J]. Finance & Trade Economics, 2025,46(02),p.103-122.

[13] Y.T.Shi, X.D. Wang and Y. Guo, et al: "How ESG Ratings Can Drive Green Innovation: Enhancing Quality and Expanding Scope" [J]. Science of Science and Technology Management, 2024,45(11),p.162-179.

[14] X.Y. Hao, Y. Zhang: Supply Chain Finance, Environmental Regulation, and Corporate Green Innovation [J]. Accounting Friends, 2025(12),p.39-48.

[15] H.B. Pan, J.H. Gao: Digital Transformation and Enterprise Innovation -- Based on Empirical Evidence from Annual Reports of Listed Companies in China [J]. Journal of Central South University (Social Sciences Edition), 2022,28(05),p.107-121.

[16] Y.P. Chen, Y. Liu: Media Focus on the Impact Mechanism of Green Technology Innovation in Heavy Polluting Enterprises -- Based on the Mediating Effects of Government Environmental Regulation and Public Participation [J]. Management Review, 2023,35(06),p.111-122.

[17] G.X. Zhang, Y.C. Feng and A.L. Wang: The Heterogeneous Effects of Different Environmental Regulations on Technological Innovation in Industrial Enterprises [J]. Management Review, 2021,33(01),p.92-102.

[18] D. Fan, X.T. Sun: Environmental Regulation, Green Technology Innovation and Green Economic Growth [J]. China Population·Resources and Environment, 2020,30(06),p.105-115.

[19] Y. Zheng, J.L. Chai and Z.M. Li: A Study on the Combined Pathways of Environmental Policy Tools to Promote Energy Conservation and Emission Reduction Performance in Coal Chemical Enterprises [J]. China Environmental Management, 2025,17(01),p.112-124.

[20] C.X. Zhao, D.L. Zhang: "The Relationship Between Managerial Power and Corporate Investment from the Perspective of Market Competition" [J]. Accounting Research, 2013, (10),p.67-74+97.

[21] M.H. Shen, W.J. Tan: Digitalization and Corporate Green Innovation Performance -- Identification Based on Dual Effects of Incremental Growth and Quality Improvement [J]. Southern Economics, 2022(09),p.118-138.

[22] X. Wang, Y. Wang: Green Innovation Effects of Environmental Information Disclosure: A Quasi-Natural Experiment Based on the Ambient Air Quality Standards [J]. Finance Research, 2021, (10),p.134-152.

[23] J.X. Zhang, N. Cai and C. Yang: The Impact of Environmental Regulation on China's Industrial Green Growth Index [J]. China Population·Resources and Environment, 2015,25(01),p.24-31.