Merging Economic Aspirations with Sustainability: ESG and the Evolution of the Corporate Development Paradigm in China

Abstract

Amid the push for sustainable and high-quality development, corporate environmental, social, and governance (ESG) performance has garnered increasing attention from stakeholders. This empirical study uses a 2009–2022 panel of 1264 A-share-listed companies to examine the impact of ESG performance on corporate sustainability paths and to identify the channels through which this impact operates. Ordinary least squares estimates show that stronger ESG performance is associated with significantly higher total factor productivity, and the effect is more pronounced in heavy-polluting industries. Mechanism tests indicate that ESG disclosure mediates this relationship, with its influence emerging over time and strengthening in subsequent years. The mediation also varies across ESG pillars, with social disclosure exerting the most decisive influence. These findings provide actionable insights—both motivating managers to strengthen their ESG engagement and informing policymakers as they seek to refine regulatory frameworks. By highlighting the value-creating role of ESG in aligning growth with sustainability, this study offers a novel perspective on corporate transformation within the context of a rapidly evolving economic landscape.

1. Introduction

High-quality development has been elevated to the centerpiece of China’s economic strategy. The 20th National Congress defined it as the primary task in building a modern socialist country, and the Third Plenary Session of the 20th Central Committee further stressed improving the institutional mechanisms that deliver it. Listed firms remain the core engines of growth; however, the path-dependent practices of the old development model have been associated with environmental violations, ethical misconduct, and financial fraud, which undermine long-term prospects and social well-being [1]. Public expectations have also shifted: investors are no longer satisfied with purely short-term economic gains and are increasingly demanding credible improvements in non-financial outcomes, particularly those reflected in ESG performance.

Against this backdrop, China’s ESG architecture has evolved from a dispersed, voluntary disclosure approach to a more structured regime. Early exchange guidelines by the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) in 2006 and 2008 were followed by the 2014 Environmental Protection Law, which introduced mandatory environmental information disclosure for listed companies. The 2018 Corporate Governance Code embedded non-financial disclosure in the governance framework, subsequent guidance by the State-owned Assets Supervision and Administration Commission required full coverage of ESG reports among central state-owned enterprises and linked ESG to executive appraisal, and recent national sustainability disclosure standards, together with an updated Corporate Governance Code, have elevated board-level responsibility for ESG risk management. This evolution motivates a focused question: does stronger ESG performance advance firms’ high-quality development in China, and through which mechanisms?

Nowadays, as the ESG concept gains global traction, academic work on this topic has proliferated. A significant strand of research argues that assuming non-financial responsibilities enables firms to serve a broader set of stakeholders beyond shareholders, which can improve contracting efficiency [2], reduce operational and market risks [3], and enhance employee engagement [4]. Strong ESG performance may also lower the cost of capital and ease financing constraints [5], thereby improving market valuation and financial health [6,7]. In contrast, some scholars argue that the benefits from non-financial commitments may not offset their costs, potentially depressing profits and diverting firms from the objective of maximizing shareholder value [8]. Others warn that ESG initiatives, which are only superficially aligned with stakeholder preferences, risk “greenwashing” [9], potentially heightening reputational exposure and inducing adverse financial consequences [10]. What remains insufficiently addressed, particularly in the context of China’s evolving multi-tier ESG regime, is whether, as disclosure quality becomes more regulated and comparable, ESG performance is translated into corporate high-quality development through the disclosure channel. Existing studies on listed firms focus primarily on financial or market responses, and the evidence is mixed. In other words, prior work has not clearly connected three elements that are now central to China’s policy architecture: whether ESG performance improves development quality, whether enhanced ESG disclosure operates as the transmission pathway, and whether this mechanism is salient precisely because disclosure has become a policy-backed governance responsibility rather than a discretionary choice. The link between ESG practices and the quality of corporate development, as well as the role of disclosure within this link, remains under-examined and constitutes the specific research gap that this study seeks to address.

This study employs ordinary least squares regressions, informed by stakeholder, agency, and signaling perspectives, to test the impact of ESG performance. Using a stepwise mediation framework and a panel of 11,841 firm-year observations from 1264 A-share-listed companies on the SSE and SZSE from 2009 to 2022, we evaluate both the direct effect of ESG performance and the mediating role of ESG disclosure. We find that, first, good ESG performance is associated with materially higher levels of corporate development quality, with a more pronounced effect among heavy-polluting industries. Second, firms with higher ESG ratings tend to issue more comprehensive and higher-quality ESG disclosures. Third, ESG disclosure partly mediates the relationship between ESG standing and high-quality development; this mediation exhibits temporal lag and varies across the environmental, social, and governance pillars.

Our research makes several critical marginal contributions. First, it extends the understanding of how ESG performance affects listed firms. Whereas earlier studies primarily examined economic outcomes such as profitability, competitiveness, financial indicators, and stock prices [6,11,12,13], our analysis provides novel China-based evidence by documenting a clear link between ESG performance and corporate high-quality development, thereby addressing a salient gap in the literature. Second, we highlight the dynamics that propel corporate high-quality development and underscore the role of non-financial performance in this process. By demonstrating that stronger ESG performance is linked to development-orientated upgrading, this study helps explain why firms should engage with ESG beyond short-term financial considerations, addressing the observed reluctance of some companies to invest in ESG activities. Third, we emphasize the mediating role of ESG disclosure, in contrast to perspectives such as those of Ge et al. (2022) [14], and thereby open up part of the black box connecting ESG performance to development outcomes. We further examine the timing and pillar-specific features of this mediating effect, showing that the pathway exhibits lagged effects and varies across environmental, social, and governance components. These findings underscore the importance of disclosure quality for firms and provide regulators with concrete guidance on supervisory priorities and standard setting [15,16].

The remainder of this paper is organized as follows: Section 2 reviews the relevant literature and develops the research hypotheses; Section 3 describes the research design, including sample selection, variable definitions, and model specification; Section 4 reports the main empirical results, followed by robustness checks in Section 5; Section 6 provides further investigations; and Section 7 concludes by summarizing the key findings, discussing implications for managers and policymakers and acknowledging the study’s limitations.

2. Literature Review and Hypothesis Formulation

2.1. ESG Performance and Corporate High-Quality Development

High-quality development is a forward-looking strategy that guides China’s economic policymaking and macroeconomic regulation, occupying a central position on the national agenda [17]. Listed companies play a pivotal role in this quality-orientated transition. In line with the principles of innovation, coordination, green development, openness, and sharing, high-quality development stresses a mutually reinforcing relationship between economic activity and the natural environment, which requires listed firms to confront legacies of heavy pollution, resource depletion, and high energy use [18,19]. Moving beyond a quantity-centered model, firms are expected to advance social welfare as an integral element of quality growth [20]. Sound corporate governance provides the institutional foundation for this trajectory [21]. The notion that business operations should be sustainable and responsible is therefore intrinsically aligned with the objectives of high-quality development [14]. Firms with commendable ESG performance not only pursue their own interests but also cultivate stakeholder relationships, assume environmental and social responsibilities [22], and achieve higher standards of corporate governance [23,24].

First, with respect to the environmental pillar, stronger environmental performance supports high-quality development because sustainability is a prerequisite for quality-orientated growth, whereas pollution undermines it [25]. Rising environmental responsibilities have prompted many listed firms to upgrade their processes and equipment and to adopt cleaner production practices that align with the “innovation” and “green” pillars, thereby strengthening their competitive advantage [26]. In contrast, inefficient resource use often reflects outdated production technologies, tighter capacity constraints, and greater pollution [27]. Transitioning toward environmentally friendly operations helps in conserving energy and meeting sustainability targets [28]. As ecological concerns intensify, China’s regulatory measures on corporate environmental responsibility are prompting listed companies to enhance pollution control, securing policy support, reducing enforcement risk, and maintaining environmental legitimacy [29,30]. Better environmental performance also enhances corporate image while reducing financial fragility and improving profitability [31,32,33], ultimately fostering competitiveness and quality development.

Second, regarding the social pillar, embracing social responsibilities can materially enhance high-quality corporate development. Stakeholder theory maintains that giving due weight to salient constituencies—for example, shareholders, consumers, and local communities—creates social value and strengthens corporate accountability [34]. Firms that lead on social performance typically provide comprehensive training, safe workplaces, and fair employment conditions, which increase motivation and productivity [35,36]. In line with resource dependence theory, a supportive work culture helps attract and retain skilled employees, thereby conferring a competitive advantage [37,38]. Consistent with the resource-based view, such socially embedded capabilities constitute distinctive assets that are difficult for rivals to imitate [39]. Active engagement in social responsibility also accumulates reputational capital [40]. Although corporate social responsibility (CSR) may entail non-trivial costs [41], evidence suggests that stronger CSR helps align shareholder and stakeholder interests, thereby reducing the potential for conflict [42]. These synergies enhance operational efficiency and profitability, and, in turn, facilitate firms’ transition toward high-quality development [43].

Finally, regarding the governance pillar, there is clear evidence that robust corporate governance underpins high-quality development. Strong governance not only strengthens competitive positioning but also provides the organizational resilience required for sustained improvement [44]. Agency theory emphasizes the misalignment between shareholders and managers, whether rooted in self-interest or neglect, which can hinder progress [45]. Effective boards, incentive schemes, and internal controls mitigate such discrepancies, align managerial actions with corporate objectives, and reduce agency costs [46]. Another concern is the potential expropriation by controlling shareholders at the expense of minority investors, which depresses efficiency [47]. Implementing sound governance practices helps ensure equitable treatment, foster productive relationships, and safeguard corporate interests [48,49,50]. In practice, firms with exemplary governance display greater transparency, operating agility, and efficiency; they manage risks more effectively, show improved financial performance, and are better positioned for high-quality development [51,52].

In summary, improvements across the environmental, social, and governance pillars enable listed firms to achieve sustained high-quality development. Accordingly, we propose the following hypothesis:

H1. 

Good ESG performance promotes high-quality corporate development.

2.2. ESG Performance and ESG Disclosure

ESG information, which captures non-financial performance, has increasingly been disclosed by listed firms. A coherent rationale emerges when we view disclosure as both a signal to reduce skepticism and information asymmetry and a means of sustaining legitimacy in the eyes of external audiences. Firms with stronger ESG outcomes have incentives to reveal credible details to enhance transparency and build trust [53,54,55]. At the same time, consistent with voluntary disclosure arguments, superior performance tends to be accompanied by richer, more verifiable reports, whereas weaker performers are more likely to issue vague, lower-quality materials [56,57]. Legitimacy perspectives further stress that public perceptions shaped by disclosure affect a firm’s social standing; as ESG becomes integral in corporate legitimacy, proactive communication helps in maintaining acceptance and support [58,59]. In practice, companies facing legitimacy pressures adopt adaptive disclosure strategies, deepen stakeholder engagement, and integrate non-financial reporting into their governance routines to reinforce legitimacy and sustain growth [60,61]. Accordingly, we propose hypothesis H2:

H2. 

Good ESG performance enhances corporate ESG disclosure quality.

2.3. The Mediating Role of ESG Disclosure

Chinese listed companies are operating amid a global slowdown and domestic industrial upgrading. Many face constraints in resource integration [62], governance quality, operational sustainability, recurring product defects [63], and insufficient indigenous innovation [64]. Given these limitations, it is unrealistic to expect firms to overcome development hurdles in isolation. High-quality development is inherently stakeholder-driven, which elevates the role of responsible investment. Strong ESG performance can strengthen relationships with salient stakeholders and expand joint value creation [65]. ESG disclosure serves as a bridge, communicating non-financial achievements to external audiences [66], informing them about CSR initiatives [67], and enhancing monitoring while reducing investment risk through greater transparency [68]. Coupled with media amplification, disclosure increases the salience of firms’ ESG efforts and builds social reputation [69], attracting ESG-orientated investors, customers, and employees and thereby conferring competitive advantage [70]. Stakeholders, in turn, use disclosed information to identify and support better performers, facilitating progress toward high-quality development [71]. Based on this rationale, we posit hypothesis H3:

H3. 

ESG disclosure mediates the relationship between ESG performance and high-quality corporate development.

This mediation is unlikely to be instantaneous. ESG information passes through reporting and verification cycles before reaching stakeholders, who frequently rely on prior-period disclosures when forming expectations [72]. Moreover, a favorable ESG reputation typically requires consistent, high-quality disclosure to be recognized and maintained [73]. Evidence suggests that stakeholders reward firms that consistently deliver superior non-financial performance over time, thereby increasing the likelihood of developmental gains [74]. Accordingly, we posit hypothesis H4:

H4. 

The mediating role of ESG disclosure exhibits a lag effect.

ESG disclosure encompasses the environmental, social, and governance pillars, and stakeholders do not weight these pillars equally [75], implying heterogeneous mediating effects. Stakeholder theory advocates for the balanced management of stakeholder relationships to sustain firm growth and recognizes a wide range of constituencies, including employees, managers, shareholders, suppliers, creditors, local communities, consumers, social media, and government agencies, whose interests merit consideration [76,77]. Building on stakeholder salience, stakeholders can be grouped into three categories: decisive actors, who possess power, legitimacy, and urgency and materially shape corporate actions [78], aspirational actors who generally lack the capacity to effect change [79], and potential actors with limited influence defined by a single attribute [80]. It follows that the ESG disclosure pillar prioritized by decisive stakeholders should display the most substantial mediating effect.

In China, social disclosure has drawn particular attention [81]. Consumers often wield substantial bargaining power in markets with large and relatively homogeneous product or service offerings, and safety concerns can create material risks for firms. Employees’ rising awareness of their rights has also elevated expectations for corporate social responsibility and has become an essential driver of managerial choices [82]. Public policy also assigns concrete social obligations to listed companies, such as poverty alleviation, which requires corresponding disclosure to demonstrate compliance and performance [83,84]. Together, these features make the audience for the social pillar both broad and influential.

For the environmental pillar, a strengthened policy emphasis has produced a series of disclosure requirements for listed firms [85], yet non-mandatory or vaguely specified rules have dampened incentives for comprehensive reporting among many companies [86]. Information gaps therefore persist, limiting stakeholders’ ability to discipline or support environmental behavior [87], and access constraints—especially in western regions and smaller cities—further reduce engagement with environmental information [88]. With respect to the governance pillar, disclosure functions similarly to traditional financial reporting by reducing information asymmetry, curtailing financial irregularities [65], and supporting financial stability [89]. Investors rely on governance disclosure to assess agency problems [90], and shareholders can respond to concerns through actions such as divestment or higher return demands [91]. As a result, the audience for governance disclosure is comparatively concentrated.

In relation to the environmental and governance pillars, the social pillar tends to encompass a larger and more decisive stakeholder set. Effective social disclosure therefore attracts stronger external support from these constituencies and is more likely to translate ESG performance into developmental gains [38]. Hence, we propose hypothesis H5:

H5. 

Social disclosure has the most pronounced mediating effect.

2.4. Industry Heterogeneity in the Promoting Effect of Corporate ESG Performance

In heavy-polluting industries, production emissions generate salient negative externalities, and sudden environmental incidents can impose substantial ecological and public-health costs, heightening societal risk awareness [92]. In response to this risk structure, China applies more intensive and frequent environmental regulation to these sectors; arrangements such as online monitoring, daily penalties, and information disclosure increase regulatory and media visibility, while communities and consumers have stronger expectations regarding corporate improvement [93]. Under such high-scrutiny conditions, improvements across the environmental, social, and governance pillars, including tighter emissions compliance, stable operation of pollution-control facilities, enhanced health, safety, and environmental management, and better community engagement, are more readily perceived and verified by regulators, media, investors, and supply chain partners. These perceived improvements translate into reputational gains and greater trust, reduce risk premiums in financing and transactions, and improve access to critical resources, including green credit and bonds, project approvals, energy quota allocations, preferential procurement opportunities, and high-quality talent and technological partnerships [94,95]. Consequently, the same increment in ESG performance is more likely to initiate a virtuous cycle of being observed, recognized, and empowered in heavy-polluting sectors, thereby converting ESG improvements into high-quality development more efficiently. Accordingly, we posit hypothesis H6:

H6. 

The promoting effect of corporate ESG performance on high-quality development is more pronounced in heavy-polluting industries.

To more clearly articulate the specific process of the aforementioned analysis, we present Figure 1, which demonstrates the internal logical structure and mechanisms of each hypothesis.

3. Research Design and Model Construction

3.1. Sample Selection

We construct our research sample using the annual data of A-share-listed companies on the SSE and the SZSE from 2009 to 2022, with the selection criteria as follows: (1) we exclude listed companies with ST and *ST (Special Treatment) status due to their typically abnormal financial conditions [96]; (2) we omit listed companies with missing or incomplete data [97]; (3) companies from the financial and insurance industries are not considered [98]. Consequently, our study comprises an unbalanced panel data set with 1264 sample companies and 11,841 observations.

3.2. Data Sources

Data on firms’ ESG performance are obtained from the Sino-Securities Index ESG ratings. The quality of ESG disclosure is measured using Bloomberg’s ESG reporting score framework. Other firm-level financial and governance variables are drawn from the China Stock Market and Accounting Research (CSMAR) database.

3.3. Variable Definition and Measurement

3.3.1. Dependent Variable

Total factor productivity (TFP) represents the corporate high-quality development level. High-quality development encapsulates not only the significant optimization of ESG performance but also a tripartite improvement in quality, efficiency, and driving force [99]. This development ushers in a shift from crude to intensive modes of production and operation [100]. TFP effectively captures the transformation efficiency between overall resource input and output, as well as the relationship between economic growth and technological progress [101], and the positioning of listed companies within the industry value chain [102]. Therefore, enhancing TFP is essential for listed companies striving for high-quality development [103].

At present, the academic community primarily estimates TFP using the Levinsohn–Petrin (LP), ordinary least squares (OLS), and fixed-effects (FE) methods. Among them, the LP method utilizes more data, making the calculation results more objective and preventing data loss when the listed companies’ investment level is zero [104,105]. Hence, this study employs the LP method to measure the dependent variable TFP during the baseline mediating effect test, followed by the use of the OLS and FE methods in the robustness tests.

3.3.2. Independent Variable

The independent variable is corporate ESG performance (ESGP). As the concept of responsible investment gains increasing recognition, several professional ESG performance-rating agencies, including MSCI, FTSE Russell, SynTao Green Finance, and Sino-Securities Index, have developed a series of mature rating systems. Nevertheless, these systems exhibit variations in evaluation criteria, inspection indicators, and coverage. The Sino-Securities Index rating system, encompassing all Chinese listed companies, has established an evaluation matrix with three pillars, 14 subject indicators, 26 key indicators, and 130 underlying data indicators, facilitating a more comprehensive and scientific measurement of non-financial performance. It is up-to-date and suitable for the Chinese situation [106], allowing it to meet the requirements of this study. Specifically, there are nine grades of Sino-Securities Index ESG ratings, from low to high, namely, C, CC, CCC, B, BB, BBB, A, AA, and AAA. For each grade, ESGP is assigned a value from 1 to 9 based on previous research [107]. The specific assignment rules are presented in

Table 1. The assignment rules for ESGP.

Rating	AAA	AA	A	BBB	BB	B	CCC	CC	C
Value	9	8	7	6	5	4	3	2	1

.

3.3.3. Mediating Variables

ESG disclosure quality (ESGD) serves as the mediating variable. Listed firms typically report non-financial information through various channels, including CSR reports, sustainability disclosures, ESG reports, integrated reporting frameworks, and supplementary sections of annual reports. Firms may follow different internationally accepted practices and guidelines when preparing these reports, which leads to variation in both the quality and the emphasis of disclosure [108,109,110]. In practice, third-party providers such as Bloomberg collect ESG information from public sources, integrate and verify the data, and then produce standardized assessments and ratings. Bloomberg’s professional ESG evaluation team, comprising 44 analysts, generates disclosure scores at both the report level and the pillar level. More concretely, ESG disclosure is measured using a set of 122 sub-indicators, with data primarily sourced from corporate social responsibility reports, annual reports, ESG-specific disclosures, and governance reports [111]. It further breaks down the overall evaluation into environmental (ED), social (SD), and governance (GD) disclosure pillars, assigning corresponding scores [112], which satisfies the requirements to examine the pillar heterogeneity of ESG disclosure. A fundamental distinction should be recognized between the ESG rating issued by the Sino-Securities Index and Bloomberg’s ESG Report rating. While the former is designed to capture corporate performance and actions, the latter emphasizes the quality of disclosure, specifically targeting the accuracy of reported information [113,114]. In this study, Bloomberg’s comprehensive ESG disclosure score is applied to quantify ESGD for listed firms. Additionally, we utilize the pillar-specific score to assess disclosure quality across the environmental, social, and governance pillars.

3.3.4. Control Variables

To mitigate the influence of firm-level heterogeneity on the study’s results, the inclusion of control variables is essential [115]. Drawing from prior research, this paper incorporates eight control variables that might affect the TFP of listed companies [116,117,118,119]. These control variables include firm size (Size), ownership type (Own), corporate listed years (ListAge), leverage ratio (Lev), return on assets (ROA), cash flow ratio (Cashflow), proportion of independent directors (Indep), and total asset turnover (ATO). Furthermore, firm and year fixed effects are also controlled in this study.

Table 2. Variable definitions.

Type	Variable	Variable Definition	Data Source
Dependent variable	TFP	Total factor productivity estimated using the LP method; natural logarithm taken.	CSMAR
Independent variable	ESGP	ESG performance rating from the Sino-Securities Index, scaled from 1 to 9.	Sino-Securities Index
Mediating variables	ESGD	Composite ESG disclosure score from Bloomberg.	Bloomberg
	ED	Environmental disclosure score.	Bloomberg
	SD	Social disclosure score.	Bloomberg
	GD	Governance disclosure score.	Bloomberg
Control variables	Size	Natural logarithm of total assets.	CSMAR
	Own	Ownership type indicator: 1 = state-owned enterprise; 0 = non-state-owned enterprise.
	ListAge	Natural logarithm of years since listing.
	Lev	Total liabilities/total assets.
	ROA	Net income/total assets.
	Cashflow	Operating cash flow/total assets.
	Indep	Number of independent directors/total number of directors.
	ATO	Operating income/total assets.

delineates detailed definitions for each variable.

3.4. Model Specification

Drawing upon the stepwise regression method introduced by Baron and Kenny (1986) [120], this paper constructs the following models to test the mediating effect, referring to the research carried out by Wen et al. (2004) [121]:

TFP_i.t = α₀ + α₁ESGP_i.t + α₂CONTROLS_i.t + ε_i.t

(1)

ESGD_i.t = β₀ + β₁ESGP_i.t + β₂CONTROLS_i.t + ε_i.t

(2)

TFP_i.t = γ₀ + γ₁ESGP_i.t + γ₂ESGD_i.t + γ₃CONTROLS_i.t + ε_i.t

(3)

Model (1) examines the correlation between ESGP and TFP. A significantly positive α₁ suggests that ESGP positively influences the TFP of listed companies. Model (2) explores the relationship between ESGP and ESGD, where a significantly positive β₁ denotes a robust positive relationship. Model (3) assesses the mediating role of ESGD. If both α₁ and β₁ are significantly positive and γ₂ is significant, it implies ESGD mediates the relationship between ESGP and TFP. Further, a significant γ₁ indicates a partial mediation by ESGD, while its absence signifies complete mediation.

4. Empirical Analyses

4.1. Descriptive Statistics

Table 3. Descriptive statistics.

Variables	Obs	Mean	SD	Min	Median	Max
TFP	11,841	9.000	1.039	5.476	8.955	11.127
ESGP	11,841	4.430	1.082	1.000	4.000	8.000
ESGD	11,841	28.857	9.525	9.909	28.005	57.439
ED	11,841	9.296	12.786	0.000	1.933	54.153
SD	11,841	13.587	7.785	0.000	12.001	38.876
GD	11,841	63.923	14.087	29.651	69.296	89.856
Size	11,841	23.156	1.287	19.665	23.065	26.062
Own	11,841	0.545	0.498	0.000	1.000	1.000
ListAge	11,841	2.487	0.638	0.693	2.639	3.332
Lev	11,841	0.479	0.196	0.053	0.491	0.882
ROA	11,841	0.052	0.061	−0.219	0.043	0.219
Cashflow	11,841	0.061	0.070	−0.171	0.057	0.249
Indep	11,841	37.523	5.594	14.290	36.360	57.140
ATO	11,841	0.701	0.483	0.072	0.591	2.723

reports the descriptive statistics of the key variables (all continuous variables are winsorized at the 1st and 99th percentiles).

The mean value of TFP is 9.000, situated within the interval of 5.476 to 11.127. This, alongside a standard deviation of 1.039, underscores a diversity in the developmental quality across the sampled firms. ESGP has an average value of 4.430, indicating a moderate collective ESG performance, which falls between the BB and B ratings. The standard deviation of 1.082 for ESGP indicates a discernible polarization in ESG performance, encompassing both top-tier AA-rated entities and several lower-tier CCC-rated entities. For ESGD, the mean value stands at 28.857, with the range stretching from 9.909 to 57.439, and a standard deviation of 9.525, highlighting a substantial variation in the quality of ESG disclosure. The mean values for ED, SD, and GD are 9.296, 13.587, and 63.923, respectively, indicating that the samples have the highest quality in corporate governance disclosure, followed by social disclosure, and the lowest in environmental disclosure. Overall, the descriptive statistics correspond with prior research, suggesting that the quality of ESG disclosure among Chinese listed firms requires further enhancement [122].

4.2. Pearson Correlation Analysis

Table 4. Pearson correlation analysis of variables.

Variables	TFP	ESGP	ESGD	ED	SD	GD	Size	Own	ListAge	Lev	ROA	Cashflow	Indep	ATO
TFP	1
ESGP	0.180 ***	1
ESGD	0.386 ***	0.190 ***	1
ED	0.333 ***	0.191 ***	0.843 ***	1
SD	0.303 ***	0.268 ***	0.758 ***	0.677 ***	1
GD	0.285 ***	0.070 ***	0.815 ***	0.426 ***	0.404 ***	1
Size	0.777 ***	0.183 ***	0.461 ***	0.385 ***	0.346 ***	0.361 ***	1
Own	0.182 ***	0.113 ***	0.007	0.018 *	0.022 **	−0.034 ***	0.266 ***	1
ListAge	0.175 ***	−0.021 **	0.188 ***	0.105 ***	0.065 ***	0.205 ***	0.245 ***	0.320 ***	1
Lev	0.452 ***	−0.014	0.043 ***	0.048 ***	0.013	0.012	0.490 ***	0.238 ***	0.224 ***	1
ROA	0.047 ***	0.112 ***	0.006	0.036 ***	0.035 ***	−0.036 ***	−0.111 ***	−0.195 ***	−0.236 ***	−0.448 ***	1
Cashflow	0.034 ***	0.027 ***	0.097 ***	0.099 ***	0.077 ***	0.058 ***	−0.027 ***	−0.085 ***	−0.082 ***	−0.251 ***	0.492 ***	1
Indep	0.073 ***	0.107 ***	0.089 ***	0.055 ***	0.067 ***	0.092 ***	0.085 ***	0	−0.008	0.024 ***	−0.003	0.001	1
ATO	0.500 ***	0.004	0.008	0.050 ***	0.037 ***	−0.053 ***	0.003	0.013	−0.037 ***	0.101 ***	0.186 ***	0.146 ***	−0.006	1

Note: *, **, and *** indicate significance at the level of 10%, 5%, and 1%, respectively; the same applies to subsequent tables.

shows that ESGP is positively associated with TFP at the 1% significance level, providing preliminary support for hypothesis H1. To draw more rigorous conclusions, we next examine the multivariate results after introducing the full set of control variables. We also note that ListAge carries a coefficient of −0.021 that is significant at the 5% level, indicating that longer listing tenure may hinder firms’ efforts to improve non-financial outcomes such as ESG performance.

Table 5. Results of the VIF test.

Variables	VIF	1/VIF
ESGP	1.10	0.91
ESGD	1.44	0.69
Size	1.95	0.51
Own	1.23	0.81
ListAge	1.22	0.82
Lev	1.87	0.54
ROA	1.74	0.58
Cashflow	1.35	0.74
Indep	1.02	0.98
ATO	1.10	0.91

displays the Variance Inflation Factor (VIF) test results. All individual VIF values and the average VIF are below the crucial threshold of 10, indicating no significant multicollinearity among the variables. This facilitates subsequent inquiries.

4.3. Baseline Mediating Effect Test

Table 6. Baseline regression results.

Variables	(1)	(2)	(3)
	TFP	ESGD	TFP
ESGP	0.009 ***	0.605 ***	0.008 ***
	(3.251)	(11.122)	(2.941)
ESGD			0.001 ***
			(2.658)
Size	0.577 ***	1.284 ***	0.575 ***
	(63.686)	(10.873)	(63.058)
Own	−0.048 **	−0.083	−0.047 **
	(−2.324)	(−0.317)	(−2.321)
ListAge	0.048 ***	−0.349	0.048 ***
	(3.491)	(−1.266)	(3.522)
Lev	0.122 ***	−2.490 ***	0.125 ***
	(3.309)	(−5.092)	(3.399)
ROA	0.693 ***	3.637 ***	0.688 ***
	(9.135)	(3.544)	(9.069)
Cashflow	0.302 ***	1.658 **	0.299 ***
	(5.896)	(2.248)	(5.850)
Indep	0.000	0.031 ***	0.000
	(0.661)	(2.697)	(0.590)
ATO	0.973 ***	0.355	0.972 ***
	(52.424)	(1.636)	(52.416)
YearFE	Yes	Yes	Yes
FirmFE	Yes	Yes	Yes
Constant	−5.306 ***	−3.162	−5.301 ***
	(−26.252)	(−1.174)	(−26.209)
F-values	947.181	38.442	858.935
Observations	11,841	11,841	11,841
R-squared	0.963	0.844	0.963

Note: ** and *** indicate significance at the level of 5% and 1%, respectively; T-statistics for the regression coefficients are in parentheses.

presents the baseline regression results of Models (1), (2), and (3).

Column (1)’s outcome shows the coefficient for ESGP is 0.009, exhibiting a significant positive association with TFP at the 1% significance level. This suggests that superior ESG performance significantly contributes to a company’s high-quality development, thus validating hypothesis H1. Enhanced environmental performance enables companies to bolster green innovation [26], mitigate pollution risks [29], optimize resource utilization [28], and appeal to environmentally conscious consumers [32]. By refining their social performance, companies can invigorate employee motivation [35], enhance their social reputation [40], manage stakeholder relations [42], and collectively improve operational efficiency [76]. Additionally, robust governance performance can intensify competitive vigor [44], mitigate agency dilemmas, reduce agency costs [46], and stimulate productivity growth. Companies are thus urged to bolster their ESGP to foster high-quality development. In addition, we find that all control variables except Indep are statistically significantly related to TFP, which supports the scientific and reasonable selection of controls in this study. More specifically, Size, ListAge, Lev, ROA, Cashflow, and ATO exhibit positive effects on TFP, suggesting that high-quality development relies on a solid asset base, sound financial and operating capacity, and adequate cash flow. In contrast, Own is negatively associated with TFP, a result consistent with prior arguments that close state ownership ties may, in certain contexts, operate as a “resource curse” that dampens firms’ intrinsic incentives to reform and transform [123].

The regression results in Column (2) reveal that the coefficient for ESGP is 0.605, demonstrating a positive and statistically significant correlation with ESGD at the 1% level. This suggests that superior ESG performance is correlated with increased ESG disclosure, thereby corroborating hypothesis H2. ESG reporting serves as a crucial mechanism for listed firms to obtain legitimacy and secure stakeholder support [53,61]. Companies demonstrating superior non-financial performance tend to provide more substantive, richer, and higher-quality ESG disclosures, differentiating themselves from firms with weaker performance [57].

As shown in Column (3), the estimated coefficients for ESGP and ESGD are 0.008 and 0.001, respectively. Both variables exhibit a significant positive relationship with TFP at the 1% level, suggesting that ESGD serves as a mediating factor in the link between ESGP and TFP. This observation endorses hypothesis H3. ESG disclosure, therefore, becomes a pivotal mechanism by which companies convey their non-financial merits [124], construct a formidable reputation, secure stakeholder resources [71], and amplify competitive advantages [70]. Owing to these advantages, firms that exhibit superior ESG performance can secure stakeholder support by means of relevant disclosures, thereby positioning themselves at the forefront of achieving high-quality development.

5. Robustness Checks

5.1. Replacement of Mediating Role Test Methods

5.1.1. Sobel Test

Referring to the methodology of Cheng et al. (2021) [125], the Sobel–Goodman mediation test is employed to verify the robustness of earlier results.

Table 7. Results of the Sobel–Goodman test.

Type of Test	Sobel–Goodman Test
Coefficient of Test	0.004 ***
Z	8.079
Proportion of Mediating Role	11.1%

Note: *** indicates significance at the level of 1%.

reports a Z-statistic of 8.079 and a coefficient of 0.004, which is significant at the 1% level, demonstrating that ESG disclosure mediates the relationship between ESGP and TFP in listed companies.

5.1.2. Bootstrap Test

Furthermore, this study employs the Bootstrap non-parametric method to further validate the mediating role of ESG disclosure. A mediating effect is indicated if the Bootstrap confidence interval does not include zero [126]. ESGD is incorporated into the Bootstrap model with 1000 resamples, yielding a 95% confidence interval ranging from 0.003 to 0.005, which excludes the value of 0. The results reported in

Table 8. Results of the bootstrap test.

Type of Test	Bootstrap Test
Coefficient of Test	0.004 ***
Lower Limit of the 95% Confidence Interval	0.003
Upper Limit of the 95% Confidence Interval	0.005
Z	7.87
Times of Repetition	1000

Note: *** indicates significance at the level of 1%.

provide additional confirmation of the mediating role of ESG disclosure.

5.2. Replacement of TFP Measuring Methods

In the baseline regressions, we measure firms’ total factor productivity (TFP) using the LP approach. Relying on a single estimator increases the risk of measurement error and may bias the findings with method-specific artifacts. We therefore recompute TFP using ordinary least squares (TFP_OLS) and firm fixed effects (TFP_FE), which helps mitigate the potential estimation bias inherent in the LP procedure and provides additional corroboration for our conclusions [127].

Table 9. Regression results after changing the measurement of TFP and introducing the instrumental variable.

Variable	(1)	(2)	(3)	(4)	(5)	(6)
	TFP_OLS	TFP_OLS	TFP_FE	TFP_FE	ESGP	TFP
ESGP	0.006 **	0.005 **	0.006 **	0.006 **		0.167 **
	(2.333)	(1.992)	(2.552)	(2.194)		(2.245)
ESGD		0.001 ***		0.001 ***
		(3.010)		(3.175)
Value					0.000 ***
					(3.104)
Size	0.781 ***	0.779 ***	0.833 ***	0.831 ***	0.236 ***	0.534 ***
	(105.595)	(104.589)	(113.253)	(112.168)	(10.015)	(23.910)
Own	−0.048 ***	−0.048 ***	−0.045 ***	−0.045 ***	0.182 ***	−0.068 **
	(−2.987)	(−2.982)	(−2.903)	(−2.897)	(2.902)	(−2.535)
ListAge	0.069 ***	0.070 ***	0.071 ***	0.071 ***	0.165 ***	0.019
	(5.963)	(5.997)	(6.139)	(6.175)	(3.302)	(0.951)
Lev	0.127 ***	0.130 ***	0.131 ***	0.135 ***	−0.960 ***	0.269 ***
	(3.638)	(3.731)	(3.709)	(3.805)	(−9.615)	(3.231)
ROA	0.383 ***	0.378 ***	0.327 ***	0.321 ***	0.806 ***	0.535 ***
	(5.544)	(5.470)	(4.716)	(4.639)	(3.411)	(4.969)
Cashflow	0.446 ***	0.443 ***	0.461 ***	0.459 ***	−0.543 ***	0.372 ***
	(10.043)	(9.989)	(10.448)	(10.391)	(−3.677)	(5.369)
Indep	0.000	−0.000	−0.000	−0.000	0.020 ***	−0.003 *
	(0.026)	(−0.059)	(−0.206)	(−0.296)	(8.969)	(−1.686)
ATO	0.972 ***	0.971 ***	0.981 ***	0.980 ***	−0.086 *	0.983 ***
	(55.018)	(55.030)	(55.222)	(55.239)	(−1.959)	(48.540)
YearFE	Yes	Yes	Yes	Yes	Yes	Yes
FirmFE	Yes	Yes	Yes	Yes	Yes	Yes
Constant	−7.403 ***	−7.399 ***	−7.969 ***	−7.964 ***	−1.787 ***	N/A
	(−45.10)	(−45.07)	(−48.85)	(−48.82)	(−3.324)	N/A
F-values	1913.092	1728.897	2145.441	1939.473	36.634	782.648
Observations	11,841	11,841	11,841	11,841	11,658	11,658
R-squared	0.979	0.979	0.981	0.981	0.544	0.579
Kleibergen–Paap rk LM						16.440 ***
Cragg–Donald Wald F						17.877 [16.38]

Note: *, **, and *** indicate significance at the level of 10%, 5%, and 1%, respectively; [16.38] represents the 10% Stock–Yogo critical value for the weak identification test.

reveals that, in Columns (1) and (3), ESGP is significantly and positively associated with both TFP_OLS and TFP_FE. Likewise, in Columns (2) and (4), both ESGP and ESGD display significant positive relationships with TFP_OLS and TFP_FE. Because the value of TFP does not affect Model (2), the three core specifications that identify the mediating role of ESGD remain valid regardless of how TFP is measured. These results strengthen the robustness of our findings.

5.3. Instrumental Variable Strategy

Despite using Sobel and Bootstrap procedures and an alternative measurement of TFP to guard against biases from mediation testing choices and variable measurement error, our main effect may still be subject to endogeneity concerns, including reverse causality, omitted variables, and sample self-selection. To address these issues in a single framework, we adopt an instrumental variable strategy. Following Li and Chen (2023), we use the market value of holdings of ESG investment funds in a focal firm (denoted value) as the instrument for ESGP [128]. Regarding relevance, ESG investment funds can interact with firms through private channels and communicate their ESG preferences, thereby encouraging firms to improve their ESG performance [129]. Regarding exogeneity, the market value held by ESG investment funds only reflects the composition of a firm’s shareholder base. Portfolio construction is determined by fund managers and has no direct logical link with a firm’s high-quality development, satisfying the exclusion restriction.

Table 9, Column (5) reports the first-stage relationship. Value is positively associated with ESGP at the 1% level; because the two variables differ markedly in scale, the printed coefficient rounds to 0.000 at three decimals, yet the association is highly significant. Column (6) presents the second-stage results. The IV-adjusted coefficient of ESGP on TFP equals 0.167 and is significant at the 5% level, indicating a positive causal effect. Moreover, the under-identification test indicates that the Kleibergen–Paap rk LM statistic is significant at the 1% level, thereby rejecting the null hypothesis of under-identification. We also conduct a weak-instrument test, and the Cragg–Donald Wald F statistic exceeds the Stock–Yogo critical value at the 10% significance level, allowing us to reject the null of weak instruments. These diagnostics further indicate that our instrument choice is appropriate. Overall, the main findings remain robust after addressing potential endogeneity.

6. Further Investigations

6.1. The Lag Effect Test

Scholars such as Glen et al. (2001) and Gschwandtner (2005) argue that the lagged term of the variable in the dynamic model only needs to be deferred for two periods to satisfy the information integrity [130,131], so this paper re-runs the Sobel–Goodman test on the mediator variable of ESG disclosure (ESGD) with data for one period lagged and two periods lagged, as summarized in

Table 10. The lag effect test based on the mediating role of ESG disclosure.

Periods Lagged	No Period Lagged	One Period Lagged	Two Periods Lagged
Sobel–Goodman Test	0.004 ***	0.005 ***	0.005 ***
Z	8.079	7.713	7.433
Proportion of Mediating Role	11.1%	12.5%	13.9%

Note: *** indicates significance at the level of 1%.

. The findings reveal that the regression coefficients of the Z-statistic are 0.004, 0.005, and 0.005 for the contemporaneous, one-period lagged, and two-period lagged models, respectively. Each coefficient is significant at the 1% level, indicating that the mediating effect of ESG disclosure persists not only in the disclosure year but also in the subsequent two years. Meanwhile, the proportion of its mediating role in the total impact is 11.1%, 12.5%, and 13.9% over time, which shows an increasing trend. This means that the mediating role of ESG disclosure truly displays a lag effect, thus verifying hypothesis H4. As listed companies might focus on ESG management during specific periods, stakeholders are increasingly valuing the consistency and longevity of corporate non-financial performance [132]. They tend to support firms that consistently demonstrate good ESG performance, aiding in their pursuit of high-quality development [74]. As ESG disclosure remains a pivotal medium for stakeholders to gauge a company’s past non-financial performance, its mediating significance is likely to be amplified, as corroborated by our findings.

6.2. The Pillar Heterogeneity Test

ESG disclosure made by listed companies encompasses three pillars, environmental (ED), social (SD), and corporate governance (GD), and each pillar attracts attention from distinct stakeholders. As demonstrated in

Table 11. The pillar heterogeneity test based on the mediating role of ESG disclosure.

ESG Disclosure Pillar	ED	SD	GD
Sobel–Goodman Test	0.001 **	0.004 ***	0.000
Z	3.120	4.864	1.225
Proportion of Mediating Role	3.7%	9.9%	1.2%

Note: ** and *** indicate significance at the level of 5% and 1%, respectively.

, when the comprehensive Bloomberg ESG report ratings are subdivided and reintroduced into the model, the mediating proportions for ED, SD, and GD are 3.7%, 9.9%, and 1.2%, respectively. This variance highlights the differing significance of each disclosure pillar, with SD having the most pronounced mediating effect, followed by ED, and GD having the least pronounced effect. This supports hypothesis H5. The historical challenges faced by China’s listed companies, such as product safety issues and labor rights violations, have heightened stakeholder concerns [133]. This has undoubtedly raised concerns among consumers and employees regarding the social performance of listed companies, and they hope to obtain relevant social disclosures to supervise these companies. The enormous bargaining power of consumers and the enormous working population in China will have a tremendous impact on listed companies [82]. Furthermore, issues like social responsibility scandals amplify investor concerns, directly affecting company operations [134]. Regulatory pressures further mandate companies to assume specific social responsibilities and ensure transparent disclosure [83]. While government departments are the primary stakeholders for ED [85], public awareness and involvement in environmental issues remain limited [135]. In terms of governance disclosure, the information is relatively simple and primarily used by investors to assess whether listed companies have significant agency problems, thereby mitigating investment-related challenges and associated risks. However, ordinary stakeholders exert limited influence on company governance [91]. Given this landscape, SD emerges as the most significant disclosure pillar, with decisive stakeholders playing a pivotal role in shaping the company’s trajectory [78].

6.3. The Industry Heterogeneity Test

Referring to Li et al. (2021), we define heavy-polluting industries using the China Securities Regulatory Commission’s Guidelines for the Classification of Listed Companies (revised in 2012) and the Ministry of Environmental Protection’s Catalog for Classified Environmental Verification of Listed Companies [136]. Specifically, we classify the following codes as heavy-polluting: B06, B07, B08, B09, C15, C17, C18, C19, C22, C25, C26, C27, C28, C29, C31, C32, D44, and D45. We then conduct a subgroup analysis. As reported in

Table 12. The industry heterogeneity test based on pollution intensity.

Variable	Heavy-Polluting Industries	Non-Heavy-Polluting Industries
	TFP	TFP
ESGP	0.009 ***	0.006
	(2.602)	(1.622)
Size	0.550 ***	0.595 ***
	(46.231)	(54.101)
SOE	−0.017	−0.045 *
	(−0.711)	(−1.915)
ListAge	0.015	0.046 ***
	(0.734)	(2.650)
Lev	−0.078	0.253 ***
	(−1.562)	(5.130)
ROA	0.597 ***	0.767 ***
	(5.530)	(7.730)
Cashflow	0.354 ***	0.329 ***
	(5.456)	(4.844)
Indep	0.000	0.001
	(0.092)	(1.305)
ATO	0.894 ***	1.004 ***
	(36.462)	(37.526)
YearFE	Yes	Yes
FirmFE	Yes	Yes
Constant	−4.555 ***	−5.763 ***
	(−16.760)	(−23.916)
F-values	401.992	681.821
Observations	4154	7635
R-squared	0.971	0.963

Note: * and *** indicate significance at the level of 10% and 1%, respectively.

, within the heavy-polluting industries group, the coefficient on ESGP for TFP is 0.009 and statistically significant at the 1% level, whereas in the non-heavy-polluting industries group, the ESGP coefficient is smaller at 0.006 and statistically insignificant. These results support H6. Although heavy-polluting sectors face stricter regulatory pressure, closer media scrutiny, and higher public expectations [93], improvements in ESG performance yield larger benefits in these settings, more quickly attracting stakeholder attention and support and thereby facilitating access to the resources required for high-quality development [95].

7. Research Conclusions, Implications, and Limitations

7.1. Research Conclusions

Actively improving ESG performance and voluntarily disclosing related information represent an essential pathway for Chinese firms to transition toward sustainable, high-quality development. Drawing on data for 1264 A-share-listed firms from 2009 to 2022, we examine the relationship between ESG performance and high-quality development, with a particular focus on the mediating role of ESG disclosure. Our main findings are as follows: (1) better ESG performance significantly promotes high-quality development, and this positive effect is more pronounced in heavy-polluting industries; (2) ESG disclosure serves as a key bridge linking ESG performance with high-quality development; and (3) the mediating effect of ESG disclosure exhibits a lag and shows pillar heterogeneity, with the social pillar playing the most crucial mediating role.

7.2. Managerial and Policy Implications

This study moves beyond the literature that confines firms’ ESG engagement to isolated and partial economic outcomes such as profitability, market competitiveness, financial performance, and stock prices [6,11,12,13] and evaluates ESG from the broader perspective of corporate high-quality development. In the context of China’s economic and social transformation, the evidence also validates and extends classic frameworks, including stakeholder theory, signaling theory, legitimacy theory, and agency theory, within an ESG setting. More importantly, our comprehensive and systematic conclusions provide valuable guidance for corporate managers and policymakers on ESG responsibility and regulation.

For corporate managers, the priority is to recognize the foundational role of strong ESG performance in improving development quality and to place ESG at the center of strategy and resource allocation. Firms should pursue sustained, substantive actions across the environmental, social, and governance pillars in order to mobilize support from ESG-sensitive investors, customers, employees, and communities. Heavy-polluting enterprises, in particular, can use ESG improvements as a practical lever to secure the critical resources required for transformational upgrading. At the same time, firms should establish a comprehensive, granular, and comparable ESG disclosure system that communicates progress credibly and fosters stable, effective channels with stakeholders, thereby reducing information asymmetry and reputational risk and enhancing access to resources. When resources are constrained, a cost-effective entry pathway is to begin with the social pillar by addressing issues of greatest salience, such as employee safety, consumer protection, and community relations, generating visible gains quickly before increasing efforts regarding the environmental and governance pillars.

For policymakers, improving firms’ ESG performance should be treated as a micro-level lever for implementing the national strategy of high-quality development. Market-based instruments such as financing subsidies, tax incentives, green credit, and green bonds can be deployed to support corporate sustained investment in environmental protection, ecological restoration, rural revitalization, common prosperity, and internal governance. It is also necessary to accelerate the development of unified national ESG disclosure guidelines and a stronger supervisory framework that enhances consistency and comparability, curbs greenwashing, and builds effective channels between firms and ESG-sensitive constituencies. Ultimately, regulation should adopt a differentiated and phased approach, rather than a one-size-fits-all approach. Priority can be given to heavy-polluting industries and social responsibility disclosure, with pilots that expand over time to form a focal-to-systemic regulatory pattern, releasing the policy dividends of ESG more efficiently and advancing sustainable, high-quality development.

7.3. Possible Limitations and Research Prospects

Objectively, this study has several limitations. First, ESG responsibility in China has contextual particularities. The government encourages firms to contribute to poverty alleviation and rural revitalization. Companies that respond actively may receive policy support, which can give them a competitive advantage in achieving high-quality development. Consequently, the generalizability of our conclusions to other countries and regions may be limited, and future research could test these relationships under different institutional and cultural conditions. Second, our analysis relies primarily on panel data. Although the findings are rich, they may require calibration and further refinement when applied to firm-level practice. In future work, researchers could select firms with outstanding track records in ESG responsibility, disclosure, and high-quality development and conduct targeted case studies and process tracing to provide actionable, context-specific evidence and to derive more practically orientated and engaging conclusions.