Green is the new gold: The role of professional managers in enhancing ESG performance in Chinese state-owned enterprises

Recent reforms in Chinese state-owned enterprises (SOEs) have transformed executive recruitment, shifting top management appointments from direct government selection to board-driven, market-oriented processes. This study examines how the presence of professional managers influences the environmental, social, and governance (ESG) performance of Chinese SOEs between 2011 and 2020. Our results show that SOEs led by professional managers exhibit significantly higher ESG performance, primarily due to reduced managerial shirking and increased appeal to green investors. These positive effects are particularly pronounced in SOEs operating in heavily polluting industries, in firms that offer equity incentives, and when professional managers hold key executive positions or face less pressure from poor financial performance. We also find a positive association between the presence of professional managers and firm value. These findings have important implications for the design of executive systems and governance reforms aimed at better aligning SOE performance with sustainable development goals.