Does firms' ESG information disclosure have contagion effect? Evidence from China

The increasing concern of the society on environmental issues has driven research on environmental, social, and governance (ESG) issues. Among the existing academic studies on the influencing factors of ESG disclosure, few scholars have investigated the contagion effect of ESG disclosure, that is, whether the ESG disclosure behavior of peer firms affect the ESG disclosure of individual firms. Therefore, based on dynamic competition theory and social learning theory, this paper examines the contagion effect of ESG information disclosure from the perspective of peer relationship networks, using a sample of A-share listed firms in China from 2009 to 2021. The study finds that there is a contagion effect in the level of firms' ESG disclosure, that is, when other firms in the same industry have a higher average ESG disclosure level, individual firm also tend to have a higher ESG disclosure level; and at the same time, this contagion effect is more pronounced among firms with state-owned nature, a high degree of marketization, financing constraints and environmental uncertainty. By exploring the mechanism of its effect, we find that the contagion effect of ESG disclosure mainly originates from the competitive imitation mechanism and the information acquisition imitation mechanism. This paper theoretically enriches the research on the factors influencing the level of ESG disclosure and the contagion effect of inter-firm behavior, and practically provides a reference for regulators to effectively supervise and improve firms' level of ESG disclosure.