Corporate Sustainability and Executive Equity Incentives: Evidence from ESG Disclosure Quality in China

Abstract

Environmental, social, and governance (ESG) disclosure is increasingly important for corporate sustainability, yet less is known about how internal incentive arrangements shape firms’ sustainability transparency. This study examines changes in ESG disclosure quality following executive equity incentive plan adoption among Chinese A-share listed firms from 2010 to 2024. We employ a propensity-score-matched difference-in-differences (PSM-DID) design to compare firms adopting equity incentive plans with similar firms that remain untreated. The results show that ESG disclosure quality increases significantly following plan adoption, and the main finding remains robust across multiple robustness checks, including estimators that account for staggered treatment timing. The improvement extends across environmental, social, and governance disclosure, with the strongest response in the environmental dimension. Mechanism analysis provides evidence consistent with reduced managerial myopia as a partial channel. Further analyses show larger point estimates for longer contractual horizons, mature firms, and firms in polluting industries, although only the life-cycle difference is marginally significant. Overall, the findings suggest that executive equity incentives are associated with greater sustainability transparency, consistent with the view that incentive design can shape managerial decision horizons and disclosure behavior.