Do ESG Ratings Discipline Managers? Evidence from the Reduction in Excessive Executive Perks

This study employs Chinese listed companies’ inclusion in SynTao Green Finance’s ESG ratings as a quasi-natural experiment. Based on the data of A-share listed companies from 2009 to 2021, it empirically examines the impact of ESG ratings on excessive executive perks using the difference-in-differences model. The results show that SynTao Green Finance’s ESG ratings significantly reduce excessive executive perks. Mechanism tests indicate that ESG ratings inhibit executives’ motivation for excessive executive perks by promoting executive shareholding and mitigating managerial myopia; and they reduce the opportunities for such excessive executive perks by lowering information asymmetry and increasing analyst coverage. Additionally, the study finds that the restraining effect of ESG ratings on excessive executive perks helps improve firms’ total factor productivity. This study not only enriches ESG-related research from the perspective of informal regulation but also provides empirical evidence for promoting the high-quality development of enterprises.