Climate governance and corporate sustainable development performance: evidence from climate-resilient urban development

Abstract

Amid escalating climate risks and the demand for sustainable development, understanding the micro-level effects of climate governance policies is crucial. This study examines whether the climate governance policy enhances corporate sustainable development performance. Using the 2017 climate governance policy as a quasi-natural experiment, we employ a difference-in-differences (DID) approach with panel data from Chinese A-share listed firms from 2013 to 2023. The results show that the climate governance policy significantly improves corporate sustainable development performance, reflected in both financial and environmental dimensions. Mechanism analysis indicates that this effect operates through increases in the scale and quality of green innovation. Findings reveal that managerial myopia and performance evaluation pressure on local officials negatively moderate the relationship, weakening the policy’s effectiveness. Heterogeneity analysis indicates that the positive effect is more pronounced among firms located in highly polluted regions, firms with stronger internal controls and higher resilience, firms operating in highly concentrated industries, firms receiving greater analyst attention, and firms located in eastern China. This study provides micro-level evidence on the effectiveness of climate governance policies and highlights the roles of innovation and institutional constraints in shaping corporate sustainability outcomes. The findings offer implications for improving policy design and promoting high-quality sustainable development.