Judicial reforms and corporate governance: The contribution of circuit courts to ESG performance improvement

Abstract

This study uses empirical data from Shanghai and Shenzhen A-share listed companies from 2010 to 2022 to examine the effects of circuit courts establishment on corporate environmental, social, and governance (ESG) performance of corporations. The findings show that circuit courts significantly enhance ESG performance, particularly in smaller private enterprises and in less-marketized regions. Analyst attention, earnings forecast divergence, and financing constraints could all moderate that influence circuit courts to varying extents. This research not only reveals a new perspective on the role of circuit courts in fostering sustainable corporate development but also provides empirical evidence to aid policymakers in using legal and institutional reforms to further enhance corporate ESG performance.