State Influence on ESG Performance in Emerging Markets: A Study of Institutional Roles

Abstract

This study investigates how institutional factors, specifically the role of the State, influence corporate ESG performance in emerging markets. Using a dataset of 293 companies operating in sensitive industries from 2017 to 2021, the analysis employs panel data models to assess the impact of State Direct Dominance (SDD), State Indirect Intervention (SII), and State typologies. The results indicate that SDD negatively affects ESG scores, potentially due to increased bureaucracy. Conversely, SII, characterized by mechanisms such as policy incentives and governance support, positively influences ESG outcomes. Additionally, companies operating in predatory States exhibit significantly lower ESG performance, highlighting governance challenges in such environments. This study provides actionable insights for policymakers, managers, and investors to promote sustainable corporate practices in emerging economies. By emphasizing the nuanced impacts of State interventions, the research advances the understanding of institutional dynamics shaping ESG outcomes.