The independent directors' Communist Party of China member status and firms' ESG performance: Evidence from Chinese listed firms

Abstract

Under the leadership of the Communist Party of China (CPC), this study aims to explore the relationship between independent directors who are CPC members and firms' ESG (environmental, social, and governance) performance. We use a sample of 30,629 A-share firms in China for the period 2012–2021. Our main results show that CPC membership among independent directors can significantly improve firms' ESG performance, with board meetings serving as an important mechanism for this effect. We also examine the impact of CPC membership on external supervision, attention levels, “full and strict governance over the Party”, and ownership nature. The influence of independent directors' CPC membership on firms' ESG performance is greater in companies lacking external supervision, those with higher attention levels, and in state-owned enterprises (SOEs).

Keywords

• Independent directors 1
• CPC2
• ESG3