Sustained learning and corporate ESG practices: evidence from returnee CEOs in China

This study explores a new channel through which environmental, social and governance (ESG) reporting mandates implemented in one country can influence firms’ ESG performance in another country, focusing on returnee CEOs in China who studied or worked abroad. We find that compared with Chinese firms led by returnee CEOs from countries without ESG mandates or Chinese CEOs with no foreign experience, firms managed by returnee CEOs from countries with ESG mandates implemented after their return show improved ESG performance. Therefore, returnee CEOs’ sustained attention to foreign regulatory environments has a lasting impact on their decision-making, particularly in relation to ESG practices. Additionally, we find that the influence of foreign ESG reporting mandates on Chinese firms’ ESG performance is stronger when mandates originate from countries with strong investor protection, when firms are audited by reputable auditors, when they generate more sales in foreign markets and when they have foreign subsidiaries. Our findings reveal how CEOs’ foreign relationships and networks can transcend geographical boundaries, shape individual behaviors and decisions and enhance ESG practices.