Science Research  Academic Press

The Impact of ESG Ratings on Enterprise Innovation--- Internal and External Governance

Li  Zhao 
Keywords: ESG rating ; enterprise innovation ; CEO 's information technology

Abstract

In recent years, with the enhancement of the awareness of sustainable development, ESG has been widely adopted by global regulators and institutional investors, bringing new connotations to enterprise management and strategic decision-making. However, there is still a research gap on the internal mechanism of ESG promoting enterprise innovation. Based on the data of China's A-share listed firms from 2011 to 2021, this paper examines the impact of environmental, social and governance (ESG) on enterprise innovation and the moderating effect of CEO's information technology background from the perspective of internal and external governance. The research shows that ESG ratings significantly promote enterprise innovation, and CEO's information technology background strengthens this effect. Further analysis of the influencing mechanisms shows that ESG ratings primarily enhance internal control quality through internal governance channels and promote enterprise innovation by improving analyst coverage through external governance channels. The research reveals that government should improve the ESG rating mechanism, and enterprises should actively participate in ESG ratings. Furthermore,when implementing a sustainable development strategy, enterprise should consider the information technology background of their professional managers.This paper makes up for the lack of research in related fields and provides an important supplement to the research on ESG and enterprise innovation.