State ownership and the value of sustainability: Evidence from China

Zhenshu Wu; Rachel Pownall; Yi-Cheng Shih; Chendi Zhang

doi:10.1016/j.irfa.2025.104142

State ownership and the value of sustainability: Evidence from China

Zhenshu Wu^*, Rachel Pownall, Yi-Cheng Shih, Chendi Zhang

^*Corresponding author for this work

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Abstract

This study examines the impact of state ownership on the performance of environmental and social (ES) stocks in China's stock markets. Using the COVID-19 market crash as an exogenous shock, we find that ES positively impacts stock returns for non-state-owned enterprises (non-SOEs); however, this effect is absent for state-owned enterprises (SOEs). The ES effect in non-SOEs concentrates on firms with strong employee relations and is more pronounced in those with high institutional ownership, financial constraints, and bankruptcy risk. In the long term, we also find that ES performance boosts stock returns for non-SOEs, but not for SOEs. These results suggest that ES investments by SOEs may be driven by non-economic motivations.

Original language	English
Article number	104142
Number of pages	15
Journal	International Review of Financial Analysis
Volume	102
DOIs	https://doi.org/10.1016/j.irfa.2025.104142
Publication status	Published - 1 Jun 2025

JEL classifications

g12 - "Asset Pricing; Trading volume; Bond Interest Rates"
g32 - "Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill"
m14 - "Corporate Culture; Social Responsibility"

Keywords

CORPORATE SOCIAL-RESPONSIBILITY
COVID-19
Environmental & Social performance
INVESTMENT
PERFORMANCE
State ownership

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title = "State ownership and the value of sustainability: Evidence from China",

abstract = "This study examines the impact of state ownership on the performance of environmental and social (ES) stocks in China's stock markets. Using the COVID-19 market crash as an exogenous shock, we find that ES positively impacts stock returns for non-state-owned enterprises (non-SOEs); however, this effect is absent for state-owned enterprises (SOEs). The ES effect in non-SOEs concentrates on firms with strong employee relations and is more pronounced in those with high institutional ownership, financial constraints, and bankruptcy risk. In the long term, we also find that ES performance boosts stock returns for non-SOEs, but not for SOEs. These results suggest that ES investments by SOEs may be driven by non-economic motivations.",

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author = "Zhenshu Wu and Rachel Pownall and Yi-Cheng Shih and Chendi Zhang",

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doi = "10.1016/j.irfa.2025.104142",

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AU - Wu, Zhenshu

AU - Pownall, Rachel

AU - Shih, Yi-Cheng

AU - Zhang, Chendi

N1 - data source:

PY - 2025/6/1

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N2 - This study examines the impact of state ownership on the performance of environmental and social (ES) stocks in China's stock markets. Using the COVID-19 market crash as an exogenous shock, we find that ES positively impacts stock returns for non-state-owned enterprises (non-SOEs); however, this effect is absent for state-owned enterprises (SOEs). The ES effect in non-SOEs concentrates on firms with strong employee relations and is more pronounced in those with high institutional ownership, financial constraints, and bankruptcy risk. In the long term, we also find that ES performance boosts stock returns for non-SOEs, but not for SOEs. These results suggest that ES investments by SOEs may be driven by non-economic motivations.

AB - This study examines the impact of state ownership on the performance of environmental and social (ES) stocks in China's stock markets. Using the COVID-19 market crash as an exogenous shock, we find that ES positively impacts stock returns for non-state-owned enterprises (non-SOEs); however, this effect is absent for state-owned enterprises (SOEs). The ES effect in non-SOEs concentrates on firms with strong employee relations and is more pronounced in those with high institutional ownership, financial constraints, and bankruptcy risk. In the long term, we also find that ES performance boosts stock returns for non-SOEs, but not for SOEs. These results suggest that ES investments by SOEs may be driven by non-economic motivations.

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KW - COVID-19

KW - Environmental & Social performance

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KW - PERFORMANCE

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VL - 102

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

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State ownership and the value of sustainability: Evidence from China

Abstract

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Keywords

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