Corporate governance mechanisms and green innovation efficiency : The moderating role of ESG performance in China's heavy-polluting industries

Firms in heavy-polluting industries play a critical role in China’s economic development but also impose significant pressures on environmental protection. Green innovation serves as an effective response to these pressures. However, its efficiency has received limited scholarly and practical attention. This study addresses this gap by examining how selected corporate governance mechanisms, including the board of directors, supervisory board, chief executive officers (CEOs), and ownership structure, relate to green innovation efficiency in China’s heavy-polluting industries, and whether environmental, social, and governance (ESG) performance moderates these relationships. Drawing on agency theory, stakeholder theory, and upper echelons theory, the study employs a panel-data design using quantitative methods, including a two-stage slack-based measure of efficiency and industry-year fixed-effects regressions. Using data from 2012 to 2022 comprising 16 heavy-polluting industries, 761 firms, and 4,145 firm-year observations, the findings indicate that the frequency of supervisory board meetings and CEO age are positively associated with overall green innovation efficiency. Additionally, supervisory board gender diversity and CEO education enhance transformation efficiency, CEO overseas experience improves research and development (R&D) stage efficiency, and state ownership reduces transformation efficiency. Furthermore, ESG performance strengthens the effects of supervisory board gender diversity on transformation efficiency and foreign ownership on R&D efficiency. Robustness checks confirm the stability of the main coefficients, and heterogeneity analyses reveal stronger effects in non-state-owned enterprises and during the pandemic. ESG reinforcement is concentrated in high-performing firms and is largely absent in state-owned enterprises. This study provides implications for owners, managers, and policymakers in heavy-polluting industries by highlighting the importance of stage-specific governance mechanisms and policy interventions to enhance green innovation efficiency. These include strengthened ESG disclosure, targeted green finance, state-owned enterprise governance reform, and the alignment of board oversight and CEO incentives with stage-specific innovation needs