Research Institute of Machinery Industry Economic&Management

Since its inception, the concept of Environmental, Social, and Governance (ESG) has become a prominent topic of international discourse. In practice, however, there has been an overemphasis on environmental protection (E) and social responsibility (S) at the expense of corporate governance (G). Moreover, skepticism exists regarding the capacity of corporate governance to generate social value. This paper investigates the interrelationships among E, S, and G within the ESG framework, with a particular focus on the role of corporate governance and the mechanisms through which it creates social value. Our findings are twofold: (1) In accordance with Adam Smith's "invisible hand" theory, the societal benefits arising from a firm's pursuit of shareholder wealth maximization often exceed those generated by direct pursuits of social welfare maximization. Therefore, firms should prioritize the maximization of shareholder returns. The primary objective of corporate governance is to maximize shareholder value, encompassing key elements such as institutional frameworks, human capital, entrepreneurship, and risk management, which collectively form the bedrock for achieving this goal. As social interest and social value are considered equivalent, strong corporate governance that maximizes shareholder returns consequently generates greater social value. Furthermore, given that corporate governance within ESG should not be bifurcated into broad and narrow interpretations, it represents the most fundamental component of the ESG framework. Within ESG, social responsibility (S) encompasses environmental protection (E). (2) Corporate governance inherently creates social value. The transmission mechanism operates as follows: robust corporate governance maximizes shareholder returns, which in turn creates social value through channels such as innovation, taxation, and employment. Looking ahead, regulators, the public, and corporations should return to this foundational principle, concentrating on corporate governance and sustainable development.

Environmental, Social, and Governance (ESG) performance is increasingly recognized as a pivotal metric for assessing corporate sustainability. Hence, this study investigates the effect of the Cultural and Tourism Consumption Promotion (CTCP) policy on corporate ESG performance. By treating the designation of demonstration cities as a quasi-exogenous policy event, a difference-in-differences (DID) methodology is adopted for a sample of Chinese A-share-listed culture and tourism companies from 2011 to 2024. The results indicate that the CTCP policy substantially improves culture and tourism firms’ ESG outcomes. Analysis of the underlying mechanisms identified three primary transmission channels: contributing to corporate revenue growth, encouraging green innovation, and alleviating financing constraints. Heterogeneity analysis revealed that the improvement effect of the policy on ESG performance is more significant in state-owned firms, those with sound governance structures, and labor-intensive culture and tourism firms. In addition, the policy may trigger strategic ESG disclosures, particularly among small-scale firms, leading to a greater divergence between their ESG reporting and their actual performance. Our findings illuminate the micro-level governance impacts of special policies for cultural and tourism consumption, providing a theoretical basis and empirical reference for improving culture and tourism industry policies and guiding firms’ sustainable development.