The Impact of the National Civilized City Program on the Environmental, Social and Governance Performance of Enterprises: Evidence from China

Abstract

The National Civilized City Program is an important governance championship for cities in China. Taking the National Civilized City Program as a quasi-natural experiment, based on the data of A-share listed companies in Shanghai and Shenzhen from 2009 to 2021, the multi-period double-difference method is used to investigate the impact, mechanism of action and heterogeneity of the National Civilized City Program on corporate ESG performance. It is found that the National Civilized City Program can significantly enhance corporate ESG performance, and this conclusion still holds after a series of robustness tests. The National Civilized City Program improves corporate ESG performance through two channels: strengthening environmental regulation and promoting the fulfillment of corporate responsibility towards employees. There is significant heterogeneity in terms of geography, firm ownership and pollution attributes in the impact of the National Civilized City Program on firms’ ESG performance.

1. Introduction

With global warming and environmental degradation posing a serious challenge to human society, promoting the realization of sustainable development around the world has become an important issue for all countries. Corporate performance in environmental (E), social (S) and governance (G) dimensions has gradually become an important criterion for the international community to assess corporate responsibility and sustainability. ESG performance is an enterprise development concept that pays full attention to non-financial factors—environmental, social and governance—and is the mainstream system for disclosing the non-financial information of enterprises. ESG performance refers to the assessment of the performance of an enterprise or an investment project in terms of sustainability and social responsibility from three dimensions: environment, society and governance. Among them, environmental factors (E) relate to an enterprise’s use of natural resources and impact on ecosystems, including greenhouse gas emissions, energy consumption, water use, and the proportion of renewable energy sources, which are usually quantified through an enterprise’s environmental management system and reporting. Social factors (S) include an enterprise’s protection of human rights, labor conditions, and social responsibility, including employee satisfaction, diversity and inclusion, supply chain management, and contributions to the community. Commonly used measurement methods include employee surveys, community feedback, and social impact assessments. Governance factors (G) relate to corporate management, shareholder rights, and corporate transparency and can cover board structure, shareholder rights, compliance, and transparency. Governance indicators are usually obtained through an enterprise’s articles of incorporation, governance reports and audit results.

In recent years, national and regional regulations and requirements for ESG performance indicators have been gradually strengthened, especially in Europe, where information transparency and the responsibility of economic agents in terms of ESG performance are promoted through the Sustainable Financial Disclosure Regulation (SFDR) and the Non-Financial Disclosure Directive (CSRD). For example, the Sustainable Financial Disclosure Regulation (SFDR) requires financial market participants to take sustainability factors into account when making investment decisions, and they must disclose the ESG performance risks and impacts on sustainable development of their investment products, in order to improve the transparency and comparability of investments and to promote sustainable investments, thereby promoting the development of renewable energy, socially responsible investment and other areas. At the same time, the introduction of the sustainability report and various international standards requiring companies to regularly disclose their performance in ESG performance can help stakeholders gain a comprehensive understanding of corporate sustainability strategies and their implementation. By regularly disclosing their ESG performance, companies pay more attention to their responsibilities in these areas, thus improving their social image and brand value, and good ESG performance can also help companies attract more capital investment. The ESG performance of enterprises has gradually become a new type of standard to measure the development potential of enterprises [1], and it is of great practical significance for the healthy operation of a country’s economy and society as well as the high-quality development of enterprises, which can help the country achieve a better balance between economic development, social progress and environmental protection and thus promote global sustainable development [2,3]. Based on this, how to promote the improvement of corporate ESG performance has become an important practical problem to be solved. Therefore, clarifying the factors affecting corporate ESG performance and exploring the main paths to improve corporate ESG performance are the core issues of microeconomics, as well as important starting points for the government to formulate ESG performance and improve the comprehensive competitiveness of enterprises [4].

The literature has mainly studied the influencing factors of corporate ESG performance from the dimensions of corporate internal characteristics and the external environment. From the perspective of internal corporate characteristics, Drempetic et al. [5] found that company size is positively related to corporate ESG performance. Wasiuzzaman et al. [6] found that corporate ESG performance is related to the characteristics of its executive members, and that the improvement of the moral of the executive team is conducive to the strength of ESG performance disclosure and the proportion of female executives being higher. At the same time, when enterprises carry out more frequent equity incentive plans, to a certain extent, it will further promote the willingness of enterprises to research and engage in development and innovation; stimulate the motivation of the executives; and make the executives have a sense of ownership [7], which can positively enhance the ESG performance of the enterprise. Zhang et al. [8] and Miller et al. [9] take the board of directors into consideration, arguing that board size and board meeting frequency have a significant improvement effect on corporate ESG performance; some other scholars start from other organizations within the enterprise to explore their impact on corporate ESG performance [10]—for example, Liu et al. [11] found that corporate party organization governance has a positive impact on ESG performance.

In terms of the external environment, the existing literature focuses on the impact of macroeconomic, cultural and environmental systems on ESG performance. At the macroeconomic level, the uncertainty of a country’s economic policy is directly proportional to its corporate ESG performance due to the existence of the “monitoring” effect and the “information” effect [12,13], and the intermediary institutions have a more obvious effect on ESG performance by increasing the dissemination of information [14]. At the same time, mandatory and modeling institutional pressure [15] and the greening of the tax system [16] can significantly improve the ESG performance of enterprises. Mooneeapen et al. [17] and Zhou et al. [18] empirically test the impact of the optimization of the business environment on enterprises’ ESG performance, proving that the optimization of the business environment can improve the ESG performance of enterprises through three mechanisms: strengthening environmental management, improving product quality and improving corporate governance. At the cultural system level, Baldini et al. [19] argues that the more management pays attention to stakeholder demands, the lower the level of corporate social cohesion, and the higher the level of its fulfillment of ESG performance responsibilities. Scholars have also investigated the mechanism of action and the impact of Confucianism culture on corporate ESG performance [20]. At the level of the environmental system, the government’s environmental regulatory instruments can enhance the level of environmental governance in government departments and optimize the urban industrial structure, which in turn increases the cost of corporate environmental investment and promotes corporate green transformation—all these improvements help enterprises to enhance their ESG performance level [21]. For example, the implementation of the Environmental Protection Tax Law [22], the carbon emissions trading policy [23], the green credit policy [24], and the pilot policy for low-carbon cities [25,26] has significantly improved the ESG performance of enterprises to a certain extent, as well as the quality of corporate ESG performance disclosure.

While the above literature provides useful references for understanding the factors influencing corporate ESG performance, there is a lack of in-depth research in the literature on the role of the National Civilized City Program, which is also an attribute of environmental regulation, in enhancing corporate ESG performance. In recent years, China has launched a series of national-level city assessment programs to strengthen the “central-local” incentive mechanism, among which the National Civilized City Program (launched in 2005) is regarded as the highest honorary title for Chinese cities and has been positively responded to by many cities. The National Civilized City Program is embedded in the “central-local” governance system and is one of the most important tools to motivate local city governments to strengthen governance in non-economic areas [27]. The National Civilized City Program is oriented toward building a civilized and harmonious city, forcing cities to improve their quality and civilization level, which is not only an attribute of environmental regulation policy [28,29] but also strengthens the supervision of social public opinion by mobilizing the whole of society to participate in the National Civilized City Program [30]. In addition, the National Civilized City Program has a strict review mechanism, which makes the elected cities subject to strict exogenous constraints, and can be persisted with for a long time, which has a long-term exogenous impact on enterprises [31,32]. This encourages enterprises to accelerate environmental governance and establish a positive social image.

So, can the National Civilized City Program improve corporate ESG performance? And through what channels does it affect corporate ESG performance? Is there any heterogeneity in the impact of the National Civilized City Program on corporate ESG performance? Based on this, this paper uses the data of A-share listed companies in Shanghai and Shenzhen from 2009 to 2021 to investigate the impact and mechanism of the National Civilized City Program on corporate ESG performance by using the multi-period double-difference method.

The marginal contributions of this paper are mainly reflected in the following three aspects: First, we focus on the impact of the National Civilized City Program on corporate ESG performance, which enriches the literature on the effect of the National Civilized City Program and the influencing factors of corporate ESG performance, also providing a new direction for the related research; second, we build a theoretical framework of the impact of the National Civilized City Program on corporate ESG performance, which is empirically tested; and lastly, based on different geographic regions, we employ enterprise ownership and pollution attributes to test the heterogeneity of the effect of the National Civilized City Program on enterprise ESG performance, which further enriches the research conclusions.

2. Theoretical Analysis and Hypotheses

2.1. The National Civilized City Program and ESG Performance

Coase [33] and North’s [34] theory of institutional economics emphasizes that the institutional environment is an extremely important factor influencing the production and business performance of firms. Scott et al. [35], from this theory, argued that an important prerequisite for firms’ sustained access to economic resources and competitive advantage is their deep embeddedness in the institutional environment of normativity, regulation, and cultural cognition. Although the National Civilized City Program is a kind of city honorary title selection implemented at the national level, it also has significant institutional attributes, which are mainly manifested in the following ways:

From the environmental dimension, the National Civilized City Program assessment system puts forward specific requirements for environmental governance for enterprises, which are reflected in the implementation process of the National Civilized City Program. In order to complete the task of ecological and environmental protection, the local government will set emission reduction targets, market incentives, and other regulatory means to impose targeted constraints on enterprises. In the 2011 version of the evaluation system for the National Civilized City Program in prefecture-level cities, for example, the “pollution prevention and control of industrial enterprises” requires that the stable compliance rate of major pollutant emissions by key industrial enterprises must exceed 90%. Therefore, in order to accelerate the internalization of the pollution externalities of enterprises, city governments have strong incentives to implement environmental regulatory measures [36,37]. On the one hand, the government will set emission reduction targets, set more environmentally friendly entry thresholds for relevant industries, and replace outdated production methods and skills with greener ones, thus facilitating the transformation and upgrading of industrial structure [38,39]. On the other hand, local governments will utilize the advantage of the market allocation of resources to actively guide enterprises to carry out energy saving and emission reduction and fulfill environmentally friendly strategies, thus improving their environmental performance [40,41].

From the social dimension, first of all, enterprises are the cells of society and inseparably form a community of destiny with stakeholders, such as the ecological environment and customers [31]. Good ESG performance is conducive to the establishment of a good brand image and helps enterprises establish harmonious public relations, which in turn enhances corporate value [42] Secondly, the National Civilized City Program requires companies to establish a good brand image. Secondly, the National Civilized City Program requires local governments in pilot areas to take into account the quality of citizens’ civilization, public infrastructure, public services, etc. While pursuing their own interests, enterprises must take the initiative to assume the corresponding social responsibility in order to maintain the coordinated development of their social value and corporate value. Finally, the social performance and environmental performance of enterprises are mutually reinforcing and beneficial. According to Li et al. [43], the National Civilized City Program can make enterprises actively fulfill their social responsibilities while guiding them to reduce emissions, and when they have a stronger sense of social responsibility, they will pay more attention to environmental protection and social issues in practice.

From the perspective of corporate governance, firstly, the National Civilized City Program can serve as an implicit constraint mechanism, requiring enterprises to take into account production efficiency and at the same time meet the requirements of energy conservation and emission reduction, as well as other selection requirements, so it puts forward higher requirements for the management level of enterprises. At the same time, the National Civilized City Program, as a means of environmental regulation by the government, can effectively promote the upgrading of industrial structure, optimize the development strategy and governance structure of enterprises [44], and maximize the level of corporate governance [45]. Finally, the National Civilized City Program will enhance the image and industry reputation of enterprises, which makes them more motivated to improve the level and quality of information disclosure; strengthen the cultivation of ESG concepts and systems; and convey the business philosophy of green development to the outside world. Based on this, this paper proposes Hypothesis 1.

Hypothesis 1.

The National Civilized City Program enhances corporate ESG performance.

So, through what means does the National Civilized City Program affect the ESG performance of companies? This paper argues that there are two main ways.

2.2. Environmental Regulation and ESG Performance

First, the National Civilized City Program enhances corporate ESG performance by strengthening environmental regulation. The National Civilized City Program has the general attributes of environmental regulation policies. From the perspective of requirements, the National Civilized City Program is limited to the minimum environmental regulation requirement that no major environmental pollution incidents with national impact can occur, and even elected cities will face strict dynamic reassessment. In addition, the National Civilized City Program has also introduced specific requirements for the coverage rate of environmental noise standard areas, the coverage rate of smoke and dust control areas, and the investment index of environmental protection. The behavior of enterprises, as microeconomic subjects, has an important impact on environmental objectives. Since the emission behavior of enterprises in the production process has negative externalities, the government will internalize the external costs caused by the emission behavior of enterprises through the formulation of environmental regulation policies, which will, in turn, influence the emission behavior of enterprises and improve the quality of the urban environment. Thus, the selection of national civilized cities has an incentive effect on local environmental governance. In order to accelerate the realization of the green transformation of enterprises, the city government is likely to implement a series of environmental regulatory measures, requiring enterprises to effectively fulfill the responsibility of green development, mainly through energy saving and emission reduction. In turn, environmental regulations will affect corporate ESG performance, mainly for the following reasons:

On the one hand, the government can make a more accurate assessment of environmental protection through the effect of environmental regulation, as well as allocate environmental protection a higher weight in the selection of city honors, which objectively strengthens the local government’s punishment of environmental pollution. As the local government’s punishment for environmental problems increases, it exerts stronger pressure on the environmental pollution behavior of enterprises in the jurisdiction, forcing them to incorporate environmental protection into their decision-making factors based on the requirements of environmental regulation [46,47]. In addition, the local government will adjust and optimize the existing business strategies to balance environmental protection, production and operation as a development policy, which will help to improve the ESG performance of the enterprises. On the other hand, environmental regulations can effectively promote the upgrading of industrial structure, thus contributing to the improvement of corporate ESG performance. Environmental regulations make participating cities set stricter environmental thresholds for relevant industries, and outdated production methods and skills are replaced by greener production methods, thus promoting the transformation and upgrading of industrial structure [44]. At the same time, local governments utilize the market to allocate resources. They utilize the advantage of the market allocation of resources to actively guide enterprises to engage in energy saving and emission reduction, which increases investment in corporate environmental governance, increases end-of-pipe governance, changes production processes, and creates more employment opportunities, thus enhancing the employment level of enterprises [48,49] and further improving corporate ESG performance [50]. Based on this, this paper proposes Hypothesis 2.

Hypothesis 2.

The National Civilized City Program can enhance corporate ESG performance by strengthening environmental regulations.

2.3. Corporate Responsibility towards Employees and ESG Performance

Second, the National Civilized City Program enhances corporate ESG performance by promoting the fulfillment of corporate responsibility towards employees. In terms of the requirements for the National Civilized City Program, it imposes a series of requirements on the overall civilization of the city. Taking the “Arrangement Table of Responsibility Breakdown of the 2021 National Civilized City Program (Above Prefectural Level) Assessment System” (hereinafter referred to as the “Assessment System”) as an example, the National Civilized City Program requires the enhancement of people’s sense of integrity, law-abidingness and responsibility, as well as the improvement of the people’s ideological awareness, moral standard, and civilization and the degree of civilization of society as a whole. Given the key role of enterprises in modern urban governance, the local government’s responsibility requirements for the measurement system will translate into the government’s requirements for the normality and appropriateness of enterprise behavior [51]. Therefore, enterprise managers must strengthen their own ideological quality and sense of responsibility, carry out staff ideological education and training within the enterprise, increase the efforts of legal education, and establish a sound policy of democratic management of the staff, which also reflects the fulfillment of the responsibility of the enterprise for the staff. From the viewpoint of the reputation effect of the National Civilized City Program, the better the reputation, the more additional advantages it will bring as a result. The research of Aula and Harmaakorpi [52] confirms that the accumulation of the city’s reputation can improve the competitiveness of the city region, which is conducive to the development of the region. Therefore, city reputation, as an intangible asset, can bring opportunities for city development, not only enhancing the recognition and loyalty of stakeholders within the city but also motivating firms within the city to continuously push for management change [32]. The reputation of a city as an intangible asset can provide opportunities for city development. Bear et al. [53] argue that the National Civilized City Program, as the city’s highest honorary title, is likely to inspire a sense of responsibility and honor in enterprises, drive improvements in their own behaviors, and strengthen their identification, emotion, and commitment to the city, thus stimulating the enterprises’ sense of humanistic care, resulting in them investing more resources in employees’ compensation, the welfare system, education, and training and development and promoting the fulfillment of their responsibilities to their employees. The reason the corporate fulfillment of employee responsibility will improve corporate ESG performance is the following:

First of all, according to the connotation of employee responsibility, employee responsibility refers to the responsibility that an enterprise should bear to its employees in the CSR system based on the stakeholder theory. According to the Guide to Corporate ESG Performance Disclosure and the Research Report on Corporate Social Responsibility in China, employee responsibility is one of the main components of a company’s social performance. Edmans et al. [54] argue that employees are the internal stakeholders of enterprises and the beneficiaries of CSR, and that enterprises’ concern for employees’ health, safety, and income is an important aspect of the fulfillment of corporate ESG performance responsibilities. Therefore, the fulfillment of employee responsibilities by enterprises will directly lead to the improvement of CSR performance, which in turn will enhance the ESG performance of enterprises. Secondly, the fulfillment of the employee responsibility of an enterprise is manifested in the enterprise’s performance in employee recruitment and employment, employee protection, employee health and safety, and employee development. Taking employee recruitment and employment as an example, when an enterprise pays attention to the fulfillment of employee responsibility, it will prompt the enterprise to standardize the recruitment process and improve the recruitment and employee training system, which will bring about the improvement and scientification of the enterprise’s internal management and systems and create more favorable conditions for the enterprise’s development, thus enhancing the enterprise’s ESG performance. Finally, when enterprises actively fulfill their employee responsibilities, employee welfare and satisfaction can be improved, increasing employee identification and belonging to the enterprise, stimulating employee motivation, reducing the chances of moral risks, increasing the human capital at the disposal of the enterprise, and thus obtaining a higher level of value realization for the company, which is conducive to the fulfillment of corporate ESG performance responsibilities [50]. Based on this, this paper proposes Hypothesis 3.

Hypothesis 3.

The of a National Civilized City Program enhances corporate ESG performance by promoting corporate responsibility towards employees.

3. Data and Methodology

3.1. Sample Selection and Data Sources

Due to the difficulty of obtaining data on unlisted companies and under different market environments, there are many similarities between unlisted companies and listed companies in terms of market environment and development strategies. Both need to be flexible in responding to competition, focusing on consumer needs [55], following regulations [56], innovating [57], and maintaining financial health [58], so the study of listed companies is to some extent relevant to unlisted companies. In this study, the listed companies in Shanghai and Shenzhen A-shares from 2009 to 2021 are selected as the research object, the samples are selected and processed according to certain screening principles, and finally 12,584 observations are obtained. Among them, the corporate financial data are all from the database of Cathay Pacific (CSMAR); the list of cities rated as National Civilized Cities in each period comes from the National Civilized Network, which is obtained through manual collection; the corporate ESG performance data come from the ESG performance rating data of Huazheng.com; and the socio-economic data at the city level come from the municipal district part of the Statistical Yearbook of China’s Cities. This paper constructs the dataset used in the benchmark regression based on the following process:

First, drawing on the method of Kou Zonglai et al., the financial data of the Cathay Pacific database from 2009 to 2021 are matched with the data of the National Civilization Network year by year and aggregated to obtain the year in which each enterprise’s city was awarded the National Civilization City status. Then, the dummy variable Treat × Post is derived according to the function, which matches the enterprise data in each year to the original enterprise panel data.

Secondly, we refer to Haijing Cai [23] et al.’s study, which treated the data of listed companies as follows: (1) according to the Guidelines for Industry Classification of Listed Companies (2012), listed companies in primary industries are excluded; (2) samples of financial and insurance industries as well as ST and ST* companies are excluded, and all variables are indented by 1% up and down; (3) the National Civilized Cities’ measurement standards for prefectural municipal city districts and county-level units, as well as municipalities directly under the Central Government municipal districts, are not exactly the same measurement standards, so this paper deletes the samples of civilized cities located in municipal urban areas and county-level cities; and (4) listed companies with serious missing data are excluded.

Finally, the processed firm panel data are matched with the socio-economic data of prefecture-level city municipal districts. The final data are presented as unbalanced panel data, and

Table 1. Descriptive statistics.

Variable	N	Mean	SD	Min	Max.
ESG	12,584	4.085	1.105	1.000	6.000
Treat × Post	12,584	0.535	0.499	0.000	1.000
COD	12,584	0.872	1.607	0.000	10.205
SOR	12,584	2.449	2.843	−0.160	20.770
Age	12,584	2.891	0.338	1.793	3.515
ROE	12,584	0.060	0.134	−0.752	0.342
Q	12,584	0.596	0.485	−0.144	2.241
PE	12,584	3.766	0.990	1.700	6.896
LEV	12,584	0.424	0.209	0.053	0.946
FE	12,584	0.141	0.051	0.074	0.392
IS	12,584	2.852	1.628	0.409	7.314
GDP	12,584	2.380	0.838	0.358	3.921
POP	12,584	6.694	0.966	4.223	9.094
FDI	12,584	3.531	3.618	−0.733	5.731
HHI	12,584	0.152	0.160	0.021	1.000

shows the descriptive statistics for each variable.

3.2. Variable Definitions

3.2.1. Dependent Variable

The dependent variable is ESG performance, which indicates the firm’s ESG performance. Referring to Wang et al. [25] and Songke et al. [59], the ESG ratings of CSI are used to measure corporate ESG performance. The CSI ESG performance rating indicators cover publicly disclosed data, social responsibility reports, and sustainability reports of listed companies in a more comprehensive way, combining quarterly evaluation with dynamic tracking, and the ESG performance data used in this paper are all year-end data. The specific assignment method is as follows: AAA to C grades are assigned a score of 9 to 1 in turn.

3.2.2. Independent Variable

The independent variable is Treat × Post, which can be decomposed as the product of the treatment-group dummy variable Treat and the participation-period dummy variable Post [60]. Treat takes a value of 1 to indicate that the city where firm i is located has been awarded the title of national civilized city during the sample period; otherwise, it takes 0. Post takes a value of 1 to indicate that the city where firm i is located in the treatment group has been awarded the title of national civilized city in year t; otherwise, it takes 0.

3.2.3. Control Variables

The control variables include firm-level, city-level and industry-level control variables. Referring to the practice of Xu [32], firm-level variables include firm age (Age), return on equity (ROE), price/earnings ratio (PE), gearing ratio (LEV), and firm value (Q); city-level variables include the level of fiscal expenditure (FE), industrial structure (IS), the level of economic development (GDP), population density (POP), and the level of foreign investment (FDI); and the industry-level variable is the industry concentration level (HHI).

3.2.4. Mediator Variables

The mediator variables are COD and SOR, which denote environmental regulation and employee responsibility, respectively. (1) Environmental regulation. In the previous studies of many scholars, the measurement of environmental regulation usually adopts two methods: one expresses the combined score of multiple pollutant removal rates or emissions, measuring elements such as wastewater, soot, and sulfur dioxide emissions, and the other uses the expenditures and revenues of various levels of environmental regulation to measure the integrated waste utilization rate in order to measure environmental regulation. The expenditures and benefits of environmental regulation are more difficult to obtain, and the use of a single pollutant emission makes it easy to ignore the impact of other pollutant emissions. Therefore, in this paper, we refer to Shi et al. and use the comprehensive environmental pollution index constructed from wastewater, soot, and sulfur dioxide emissions to represent the inverse indicator of environmental regulation [61]. The steps are as follows: firstly, the relative level of emissions of pollutant k compared to the national average emissions of that pollutant is calculated for year t for city i, respectively. Since the resulting relative numbers are dimensionless variables that avoid the effects of unit and absolute values of emissions of different pollutants, it is valid to sum them. Secondly, the relative values of the emissions of the three pollutants can then be arithmetically averaged to arrive at the size of the city’s environmental pollution index for a given year, with a larger index indicating weaker city environmental regulation; conversely, it reflects stronger city environmental regulation. (2) Employee Responsibility. Employee responsibility data come from the detailed list of CSR scoring indicators published by Hexun.com. The definition and symbolic representation of each variable are shown in

Table 2. Variable definitions.

Variable Type	Variable Name	Variable Symbol	Calculation Method
dependent variable	ESG performance	ESG	Assign a score of 9 to 1 for grades AAA to C in that order.
independent variable	National Civilized City Program	Treat × Post	If the city where firm i is located is selected in year t, it takes the value of 1, and vice versa, it takes the value of 0.
mediator variables	Environmental regulation	COD	PI = 1/3(R1 + R2 + R3), with R1 being the relative emission level of a pollutant
	Employee responsibility	SOR	Breakdown of CSR scoring indicators published by Hexun.com
firm-level control variables	Age of business	Age	ln(year-year of listing + 1)
	Return on net assets	ROE	ln(total assets at year-end + 1)
	PE ratio	PE	Average annual market capitalization/average annual shareholders’ equity
	Gearing	Lev	Total liabilities at year-end/total assets at year-end
	Enterprise value	Q	ln(market value of the firm/replacement cost of the firm’s capital + 1)
city-level control variables	Level of fiscal expenditure	FE	Local general budget expenditures/GDP
	Industrial structure	IS	ln(value added of tertiary sector/value added of primary sector)
	Level of economic development	GDP	GDP per capita
	Population density	Density	ln(average annual population/urban land area + 1)
	Level of foreign investment	FDI	ln(FDI/GDP + 1)
industry-level control variables	Industry concentration	HHI	HHI index

.

3.3. Research Models

Based on the theoretical analysis in the previous section, in order to test the research hypotheses, this paper sets up a regression model, as shown in model (1), to analyze whether the National Civilized City Program will have an impact on corporate ESG performance. At the same time, the National Civilized City Program may enhance corporate ESG performance by strengthening environmental regulation and promoting the fulfillment of corporate responsibility to employees. For this reason, hypotheses H2 and H3 are tested by constructing mediated effect models (2) and (3), respectively. It is important to note that all the regression models in this paper are high dimensional and fixed in terms of industry, year, and region at the same time, and the regression models set up are as follows:

$${ESG}_{it}={\alpha }_0+{\alpha }_1{Treat}_i*{Post}_t+{\alpha }_2{Control}_{it}+{\mu }_i+{\nu }_c+{\sigma }_t+{\epsilon }_{it}$$

(1)

$${COD}_{it}={\beta }_0+{\beta }_1{Treat}_i*{Post}_t+{\beta }_2{Control}_{it}+{\mu }_i+{\nu }_c+{\sigma }_t+{\epsilon }_{it}$$

(2)

$${SOR}_{it}={\gamma }_0+{\gamma }_1{Treat}_i*{Post}_t+{\gamma }_2{Control}_{it}+{\mu }_i+{\nu }_c+{\sigma }_t+{\epsilon }_{it}$$

(3)

where subscript i denotes a firm, ESG_it is a dependent variable, Treat × Post_it is an independent variable, and α, β, and γ denote the degree of influence of the National Civilized City Program, environmental regulation, and employee responsibility on the firm’s ESG performance, respectively. control_it denotes a series of control variables, μ_i denotes an industry fixed effect, v_c denotes a region fixed effect, σ_t denotes a year fixed effect, and ε is the random perturbation term.

4. Empirical Analysis

4.1. Parallel Trend Tests and Dynamic Effects Analysis

The parallel trend condition for the treatment group and the control group over time is an important prerequisite for using a multi-period DID approach for policy evaluation. Specifically, the trend of changes in ESG performance of enterprises in the experimental group and the control group should be consistent prior to receiving the title of National Civilized City Program. Due to the dynamic implementation process of the National Civilized City Program policy, the traditional parallel trend test is only suitable for single-period policy variables, for which we refer back to Beck et al. [62] and Wang and Bu [63]. Due to the practice of testing multi-period double-difference parallel trends, combined with the time frame of this paper, a window period of 16 years is set, i.e., the 4 years prior to receiving the title of National Civilized City Program and the 12 years following the award of the title. On this basis, the change in the dynamic effect coefficient of the policy and its relationship with zero are analyzed to test whether the year of the policy shock and the significance of the ESG performance of each city prior to that year satisfy the parallel trend condition, and the results are shown in Figure 1.

It can be found that the dynamic coefficients at 95% confidence intervals intersect the X-axis in the first four years of the policy implementation, indicating that the interaction terms do not pass the significance test until the year of the policy shock, suggesting that the trend of changes in the ESG performances of the experimental group and the control group is roughly similar, in line with the parallel trend assumption. Meanwhile, the dynamic coefficients of the National Civilized City Program are far away from the X-axis at 95% confidence intervals in the year of policy implementation and in the next 12 years, which indicates that the ESG performance of enterprises in the control group and the experimental group has changed significantly after obtaining the title of National Civilized City Program. Therefore, the model passed the parallel trend test.

From the perspective of the dynamic effect of the National Civilized City Program, in the first four years after being awarded the title of National Civilized City Program, the dynamic coefficient gradually improves, and the difference from zero shows a gradually shrinking trend—that is, more and more tend to zero, but the increase is small, indicating that the promotion effect on the ESG performance of the enterprise is not obvious before being awarded the title of National Civilized City Program. In the year after being awarded the title of National Civilized City Program and later, it can be seen that the dynamic coefficient shows an overall increasing trend within the 95% confidence interval. The dynamic coefficient shows an overall increasing trend within the 95% confidence interval, with a larger increase, indicating that the National Civilized City Program has always been effective in enhancing the ESG performance of enterprises, and the incentive and constraint effects of the policy have been enhanced year by year with a certain degree of continuity. This may be due to the fact that the National Civilized City Program has a strict review mechanism, whereby the evaluated cities are required to undergo a comprehensive review every three years, and the cities ranked in the last three for two consecutive years of evaluation will have the National Civilized City Program titles cancelled. The dynamic and continuous review mechanism ensures the continuity of the policy incentives and constraints. Therefore, within a certain number of years, the National Civilized City Program has a stable, continuous and significant effect on the environmental, social and governance performance of enterprises.

4.2. Baseline Regression Results

The results in

Table 3. Baseline regression results.

Variables	(1)	(2)	(3)	(4)
	ESG	ESG	ESG	Equity Concentration
Treat × Post	0.069 **	0.064 *	0.072 **	0.0780 *
	(2.06)	(1.88)	(2.11)	(0.449)
Age	−0.109 **	−0.123 ***	−0.073	−6.001 ***
	(−2.55)	(−2.71)	(−1.61)	(1.103)
ROE	0.587 *	0.604 *	0.665 *	45.54 ***
	(1.69)	(1.75)	(1.91)	(6.131)
PE	−0.136 ***	−0.147 ***	−0.133 ***	1.539 ***
	(−5.86)	(−6.22)	(−5.61)	(0.407)
LEV	−0.720 ***	−0.744 ***	−0.708 ***	−3.832 **
	(−8.79)	(−9.11)	(−8.41)	(1.699)
Q	−0.211 ***	−0.251 ***	−0.252 ***	−6.296 ***
	(−5.44)	(−6.13)	(−6.20)	(0.776)
FE	−0.284	−0.426	1.152	9.389
	(−0.68)	(−0.81)	(1.56)	(7.131)
IS	−0.047 **	−0.047 *	0.025	−0.722
	(−2.43)	(−1.91)	(0.35)	(0.921)
GDP	0.045	0.048	0.070	0.286
	(1.02)	(0.91)	(1.08)	(0.767)
POP	0.042 *	0.045	0.064	0.108
	(1.88)	(1.60)	(1.42)	(0.626)
FDI	0.024	0.016	0.090	0.128
	(0.82)	(0.54)	(1.24)	(0.317)
HHI	−0.046	−0.036	−0.101	−1.599
	(−1.42)	(−1.03)	(−1.45)	(2.052)
Constant	0.021	0.058	0.065	0.021
	(0.22)	(0.60)	(0.67)	(0.22)
Industry-FE	Y	Y	Y	Y
Year-FE	N	Y	Y	Y
City-FE	N	N	Y	Y
Observations	12,584	12,584	12,584	12,584

Note: ***, **, * denote significant at the 1%, 5%, and 10% levels, respectively, and the numbers in parentheses are t-values, as in the table below. Source of data: Organized according to the empirical results of the study, followed by the same table.

show the empirical tests conducted on the impact of the National Civilized City Program on firms’ ESG performance. This part of the empirical test refers to the approach of Huang et al. [10,29,54] and adopts the progressive analysis logic of gradually adding fixed effects. In regression model (1), only a single industry-level fixed effect is included, and the regression coefficient of the National Civilized City Program on corporate ESG performance is 0.069, which passes the statistical significance of 5%; in regression model (2), the year-level fixed effect is further included, and the regression coefficient of ESG is 0.064 and passes 10% statistical significance; finally, by including industry, year, and region-level fixed effects, the regression coefficient of ESG is 0.072 and passes 5% statistical significance. It can be seen that by controlling for other conditions and fixing the year, industry, and region, the National Civilized City Program can make the ESG performance of enterprises within the awarded cities increase, on average, by 0.072. Therefore, awarding the title of national civilized cities can improve the ESG performance of enterprises, and hypothesis H1 is valid.

Concerning the question of how the National Civilized City Program affects the internal management of firms and thus enhances their ESG performance, the key indicators of the National Civilized City Program for corporate governance are empirically demonstrated, as the equity concentration usually reflects the distribution of equity among shareholders of a company, which has an important impact on the governance structure and decision-making mechanism. Firms with high equity concentration often imply that minority shareholders have greater influence; they can participate more effectively in corporate management and strategic decision-making and thus may be better than firms with dispersed equity in terms of governance effectiveness. Therefore, this paper adopts equity concentration to explore the impact of the National Civilized City Program on the internal management of the company. Table 3, column (4), demonstrates the impact of national civilized cities on the equity concentration of companies. From the results, we can observe that the construction of national civilized cities can significantly increase the equity concentration of companies, and controlling for other conditions so they remain unchanged, the construction of national civilized cities can cause an average increase in the equity concentration of the companies within the rated cities. The results show that the construction of national civilized cities can significantly increase the equity concentration of enterprises by 0.078. Therefore, the construction of national civilized cities can significantly increase the equity concentration of enterprises.

4.3. Robustness Tests

4.3.1. Time Placebo Test

In order to avoid the situation that the differences in corporate ESG performance are caused by time changes, this paper refers to Liu and Xu [30] ’s study, and the year of policy shocks for firms located in national civilized cities is advanced by 2, 3, and 4 years, respectively, as shown in

Table 4. Placebo test.

Variables	(1)	(2)	(3)
	ESG	ESG	ESG
did_2	0.042
	(1.02)
did_3		0.036
		(0.83)
did_4			0.026
			(0.59)
AGE	0.067 *	0.074 **	0.075 **
	(1.93)	(2.15)	(2.17)
ROE	−0.073	−0.073	−0.073
	(−1.61)	(−1.61)	(−1.61)
PE	0.665 *	0.666 *	0.666 *
	(1.92)	(1.92)	(1.92)
LEV	−0.133 ***	−0.132 ***	−0.133 ***
	(−5.61)	(−5.61)	(−5.61)
Q	−0.708 ***	−0.708 ***	−0.708 ***
	(−8.41)	(−8.41)	(−8.40)
FE	−0.252 ***	−0.252 ***	−0.252 ***
	(−6.21)	(−6.20)	(−6.20)
IS	1.175	1.165	1.149
	(1.59)	(1.58)	(1.56)
GDP	0.026	0.030	0.030
	(0.37)	(0.42)	(0.42)
POP	0.063	0.065	0.066
	(0.98)	(1.00)	(1.03)
FDI	0.065	0.065	0.064
	(1.45)	(1.45)	(1.44)
HHI	0.095	0.095	0.093
	(1.30)	(1.31)	(1.28)
Constant	−0.106	−0.105	−0.103
	(−1.52)	(−1.51)	(−1.48)
Year-FE	Y	Y	Y
City-FE	Y	Y	Y
Industry-FE	Y	Y	Y
Observations	12,584	12,584	12,584

Note: ***, **, * denote significant at the 1%, 5%, and 10% levels, respectively, and the numbers in parentheses are t-values.

. In doing so, we construct new dummy variables—did_2, did_3, and did_4—to carry out the regression. From the results, it can be seen that after advancing the policy by 2, 3 and 4 years (did_2, did_3, and did_4), the coefficients are not significant, indicating that there is no systematic difference in the time trend of the ESG performance of enterprises in pilot cities and non-pilot cities, proving the robustness of the regression results in this paper.

4.3.2. PSM Test

In this study, the propensity score matching (PSM) method was applied to match the experimental group with the control group to reduce the effect of sample selection bias and further test the research hypotheses in the previous paper. Referring to the practice of Wang, all the control variables in this paper were used as covariates and matched using the one-to-one nearest neighbor matching method, which means that for each sample of the experimental group, the sample nearest to the control group was selected to be matched, the caliper distance was chosen to be 0.01, and the logit model was used to estimate the propensity score. If the standardized deviation of most covariates after the balance test is substantially reduced and less than 10% after matching and the t-test result is not significant, it means that the selection of sample firms is not random. Finally, the results after matching were further regressed using the multi-period DID, and if the significance level passed, the robustness of this paper’s model was proved.

The results of the balance test are shown in

Table 5. Balance test results.

Variables	Match	Deviation	Decrease in Deviation	t-Value	p-Value
AGE	U	27.7	88.9	13.37	0
	M	3.1		0.99	0.322
ROE	U	−1.1	13.5	−0.52	0.604
	M	0.9		0.3	0.763
PE	U	1.9	41.6	0.91	0.361
	M	1.1		0.37	0.708
LEV	U	−11.5	95.3	−5.52	0
	M	−0.5		−0.18	0.86
Q	U	−5.7	80.1	−2.73	0.006
	M	−1.1		−0.37	0.715
FE	U	−20.1	87.3	−9.31	0
	M	2.6		1.09	0.275
IS	U	121.8	95.2	61.37	0
	M	−5.9		−3.27	0.001
GDP	U	153	97.9	73.8	0
	M	−3.3		−1.5	0.134
POP	U	99.8	99.2	48.92	0
	M	0.7		0.32	0.751
FDI	U	61.6	95	28.81	0
	M	−3.1		−1.24	0.216
HHI	U	−12.1	80.3	−5.79	0
	M	−2.4		−0.76	0.45

, which shows that after PSM matching, the standardized deviation of the variables between the two groups of samples is significantly reduced—they were all within 10% and the t-value was not significant, indicating that the selection of samples in this paper is not random. Figure 2 shows that the dispersion of the variables after matching is reduced and the distribution of the samples is relatively concentrated, indicating that the vast majority of samples are matched successfully. This indicates that the covariates and matching method selected in this paper are good, and there is no systematic bias in the matched covariates. To summarize, the results of this test support Hypothesis 1.

4.4. Mediation Effects Test

This paper draws on the analysis of Jiang, and in order to exclude the influence of endogeneity, the mediation effect test should focus on the causal relationship between the explanatory variables and the explanatory variables. Also, explaining the role of the mediator variable on the explanatory variables should be direct and obvious, using theory or the literature to support the examination of the causal relationship between the explanatory variables and the mediator variable with a regression method similar to the baseline regression. This is to test, without the need to repeat regressions, the relationship between the mediating variable and the explanatory variable. Since this paper has used sufficient theory to analyze the relationship between environmental regulation and the corporate fulfillment of employee responsibility on corporate ESG performance in the previous section, a high-dimensional fixed-effects regression is used next to examine the impact of the National Civilized City Program on environmental regulation (COD) and employee responsibility (SOR). Column (1) of

Table 6. Mediated effects test.

Variables	(1)	(2)
	COD	SOR
Treat × Post	−0.274 ***	0.214 *
	(−4.91)	(1.79)
Age	−0.001	0.662 ***
	(−0.06)	(3.17)
ROE	−0.303	3.839 ***
	(−1.06)	(2.76)
PE	−0.027	−0.471 ***
	(−1.42)	(−5.46)
LEV	0.005	1.697 ***
	(0.09)	(5.18)
Q	0.070 **	0.173
	(1.98)	(1.13)
FE	−4.095 **	1.017
	(−2.06)	(0.48)
IS	0.920 ***	−0.100
	(9.58)	(−0.40)
GDP	−1.153 ***	−0.144
	(−9.51)	(−0.48)
POP	0.433 ***	−0.923 ***
	(7.61)	(−5.04)
FDI	0.214 ***	0.132
	(5.60)	(1.54)
HHI	−0.408 ***	−0.118
	(−3.80)	(−0.33)
Constant	−1.354 *	7.943 ***
	(−1.73)	(3.96)
Industry-FE	Y	Y
Year-FE	Y	Y
City-FE	Y	Y
Observations	12,584	12,584

Note: ***, **, * denote significant at the 1%, 5%, and 10% levels, respectively, and the numbers in parentheses are t-values.

shows the regression results of the explanatory variables and the mediating variable of environmental regulation, and it can be seen that the mediation effect model is significant at the 1% level. Also, the National Civilized City Program can reduce the comprehensive environmental pollution index of the cities under its jurisdiction by 27.4% on average, which indicates that it can enhance the effectiveness of environmental regulation. Column (2) of Table 6 shows the regression results of the National Civilized City Program concerning employee responsibility, and the results are still significant at the 10% level, i.e., the National Civilized City Program can effectively promote the fulfillment of employee responsibility of enterprises by 21.4% on average. In summary, the National Civilized City Program can enhance corporate ESG performance by strengthening environmental regulation and employee responsibility fulfillment, and hypotheses H2 and H3 are verified.

4.5. Endogeneity Analysis

As the city characteristics change due to the National Civilized City Program—that is, the changes in the ESG performance of enterprises may also affect the effectiveness of the National Civilized City Program, and there may be an endogeneity problem between the two—it is necessary to analyze the endogeneity of the national civilized cities and the ESG performance of enterprises. At the same time, since the National Civilized City Program puts forward specific requirements for the environment, the effectiveness of environmental regulation will also exhibit reverse causality concerning the National Civilized City Program, and the National Civilized City Program and environmental regulation also need to be further tested endogenously. In this paper, we refer to the studies of Nunn and Qian and utilize the instrumental variable method to address the above endogeneity problem [63,64]. The choice of instrumental variables must be strongly correlated with the endogenous variables and uncorrelated with the error term, and the use of policy lag over one period as an instrumental variable can also avoid the reverse causality problem to some extent [65,66,67]. In this paper, we introduce one period of lag for the National Civilized City Program and use two-stage least squares (2sls) for regression. On the one hand, from the perspective of correlation, the correlation of the lagged term is valid because the lagged term differs from the current dependent variable in time, but it has a time–series relationship with the core explanatory variables. On the other hand, from the perspective of exclusivity, for the ESG performance of the enterprise, the basis of the measurement of the ESG performance of the enterprise comes from the ESG performance of the current year, and the ESG performance of the enterprise is more “internalized” than “internalized”. On the other hand, from the perspective of exclusivity, the ESG performance of enterprises is measured based on the environmental, social and governance performance of the year, and the ESG performance of enterprises is more of an “internalized” process of factor endowment, decision-making systems and other factors, and the policy shocks in the lagging period do not have any obvious relevance to the ESG performance of the year. For environmental regulation, although the National Civilized City Program has specific requirements for urban pollution prevention, energy saving and emission reduction, it requires participating cities to obtain and maintain “the National Civilized City Program Nomination Qualification Cities” for at least two years, so the transmission effect of its impact on environmental regulation will not take effect immediately. Thus, the lagged term satisfies the exclusivity characteristics of both corporate ESG performance and environmental regulation.

The endogeneity test results are shown in

Table 7. Endogeneity test regression results.

Variables	(1)	(2)	(3)
	Phase I	Phase II	Phase II
	Treat × Post	ESG	COD
L.Treat × Post	0.048 ***
	(4.82)
Treat × Post		1.317 **	−0.080 ***
		(2.33)	(−2.62)
Kleibergen–Paap rk LM statistic	23.27
Cragg–Donald Wald F statistic	24.81
Control variable	Y	Y	Y
Industry-FE	Y	Y	Y
Year-FE	Y	Y	Y
Observations	12,584	12,584	12,584

Note: ***, ** denote significant at the 1% and 5% levels, respectively, and the numbers in parentheses are t-values.

, where column (1) shows the effect of the first-stage instrumental variable on the dependent variable (Treat × Post). The coefficient is 0.048, which is significantly positive at the 1% level. Also, considering the Kleibergen–Paap rk LM statistic of the lagged term on the ESG performance of firms in the first stage and the F-value, it can be seen that both of them are greater than 10, indicating that the selected instrumental variables do not suffer from weak instrumental variable problems. From columns (2) and (3), it can be seen that when controlling for other variables, the instrumental variable interaction term Treat × Post has a significant effect on both corporate ESG performance and environmental regulation, with estimated coefficients of 1.317 and −0.08, respectively. Also, they have absolute values greater than their respective benchmark regressions, indicating that the instrumental variable estimation results support the inference of Hypotheses 1 and 2—that is, the National Civilized City Program can effectively strengthen environmental regulation and improve corporate ESG performance. In summary, the endogeneity test is passed.

4.6. Heterogeneity Analysis

4.6.1. Geographical Heterogeneity

In order to explore the differences in the effect of the National Civilized City Program between different regions, referring to Liu et al., the sample is divided into “east-west and central” regions [30]. According to the National Statistical Yearbook (National Bureau of Statistics, 2023), China’s geographic region is divided into the eastern, central and western regions: the eastern region includes the nine provinces of Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong and Guangdong; the central region includes the six provinces of Shanxi, Anhui, Jiangxi, Henan, Hubei and Hunan; and the western region includes the 12 provinces and municipalities of Sichuan, Guizhou, Yunnan, Guangxi, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Inner Mongolia and Chongqing. Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Inner Mongolia and Chongqing—12 provinces and municipalities directly under the central government. The regression results are shown in

Table 8. Heterogeneity regression results.

Variables	Geographical Heterogeneity			Ownership Heterogeneity		Heterogeneity of Pollution Properties
	Eastern Part	Central Part	Western Part	State Enterprise	Private Enterprise	Heavy Pollution	Non-Heavy Pollution
	(1)	(2)	(3)	(4)	(5)	(6)	(7)
Treat × Post	0.065 *	0.251 **	−0.082	0.135 **	0.028	0.091	0.077 **
	(1.71)	(2.15)	(−0.64)	(2.42)	(0.61)	(1.09)	(2.04)
Age	−0.079	0.052	0.173	0.069	−0.138 **	−0.222 *	−0.046
	(−1.56)	(0.39)	(0.92)	(0.68)	(−2.57)	(−1.72)	(−0.92)
ROE	−0.015 ***	−0.002 ***	0.030	−0.119 ***	−0.003	−1.264 ***	0.831 **
	(−2.62)	(−3.31)	(1.34)	(−2.94)	(−1.62)	(−2.70)	(2.22)
PE	−0.192 ***	−0.141 ***	−0.116 ***	−0.143 ***	−0.169 ***	−0.228 ***	−0.126 ***
	(−10.00)	(−4.55)	(−3.09)	(−6.71)	(−8.15)	(−5.41)	(−4.87)
LEV	−0.631 ***	−0.731 ***	−0.672 **	−0.423 ***	−0.764 ***	−0.830 ***	−0.740 ***
	(−6.26)	(−3.69)	(−2.32)	(−2.73)	(−7.19)	(−3.46)	(−8.16)
Q	−0.170 ***	−0.183 **	−0.202 *	−0.171 ***	−0.164 ***	−0.082	−0.285 ***
	(−3.99)	(−2.18)	(−1.72)	(−2.89)	(−3.54)	(−0.94)	(−6.55)
FE	1.119	3.271 *	0.519	1.013	1.008	0.627	0.587
	(1.13)	(1.79)	(0.59)	(1.07)	(1.28)	(0.65)	(0.66)
IS	−0.068	0.055	0.491	0.204 *	−0.006	−0.043	0.025
	(−0.87)	(0.27)	(1.35)	(1.81)	(−0.07)	(−0.25)	(0.31)
GDP	0.451 ***	0.009	0.182	−0.065	0.133 *	0.158	−0.000
	(2.75)	(0.12)	(0.25)	(−0.60)	(1.67)	(1.10)	(−0.54)
POP	0.079	0.172	1.245	0.112	0.015	0.087	0.045
	(1.58)	(1.07)	(1.13)	(1.53)	(0.25)	(0.81)	(0.87)
FDI	−0.000	−0.006 *	0.003	−0.000	0.001 *	0.001	0.000
	(−0.15)	(−1.67)	(0.92)	(−0.38)	(1.65)	(0.82)	(0.33)
HHI	0.091	−0.190	0.147	−0.085	0.198 *	−0.071	0.058
	(0.76)	(−0.73)	(0.49)	(−0.47)	(1.71)	(−0.21)	(0.55)
Constant	3.490 ***	0.882	−3.311	3.977 ***	5.600 ***	5.834 ***	4.703 ***
	(3.81)	(0.48)	(−0.51)	(4.53)	(6.86)	(4.88)	(9.80)
Observations	8838	1452	2292	4939	7545	3811	8769
Industry-FE	Y	Y	Y	Y	Y	Y	Y
Year-FE	Y	Y	Y	Y	Y	Y	Y
City-FE	Y	Y	Y	Y	Y	Y	Y
p-value	0.011 **	0.034 **	0.012 *	0.050 ***		0.063 **

Note: 1. ***, **, * denote significant at the 1%, 5%, and 10% levels, respectively, and the numbers in parentheses are t-values. 2. In order to exclude the difference in sample size between groups after the samples are grouped together, a direct comparison of the size of the coefficients will produce a sample bias. Therefore, this paper uses the Fisher between-groups regression test, and the p-value of the heterogeneity test is calculated by the Fisher between-groups test (with 2000 samples), where for the coefficient variability test for the three regressions, the p-value for column (1) indicates that the between-groups for the regressions of column (1) and column (2). The p-value of the coefficient difference test for column (2) indicates the p-value of the between-group coefficient difference test for the regressions of columns (2) and (3), and the p-value of column (3) indicates the p-value of the between-group coefficient difference test for the regressions of columns (3) and (1). The p-values for columns (4)–(5) indicate the p-values for the test of difference in group coefficients for the regressions of columns (4) and (5). Columns (6)–(7) are the same, and the following table is the same.

in columns (1), (2) and (3). The p-value of the between-group test for East and Central, Central and West, and West and East is less than 10%; then, it indicates that East, Central and West have significant differences, which is consistent with the exclusion of the effect of the differences in sample sizes among different groups and meets the premise of the assumption of heterogeneity. From the regression results, it can be seen that the impact of the National Civilized City Program on the ESG performance of enterprises in the east and central regions is significant, but it is not significant in the western region, and even the coefficient is negative in the western region. Meanwhile, according to the results of the parallel trend test, it can be seen that the cities in the eastern and central regions have significant differences before and after obtaining the construction of the National Civilized City Program, which is significant at the 95% confidence interval, while the cities in the western region do not have any significant differences before and after the National Civilized City Program, which again proves the conclusion of the regression. At the same time, in order to further exclude the impact of other policy interventions, Figure 3, Figure 4 and Figure 5 represent the parallel trend test in the eastern, central and western regions, respectively. As can be seen from Figure 3, Figure 4 and Figure 5, the trend is consistent before the National Civilized City Program, passed the parallel trend test. According to Figure 3 and Figure 4, it can be seen that the eastern and central regions before and after the National Civilized City Program there is a significant difference, and it can be seen from Figure 5 that there is no significant difference between the western region before and after the National Civilized City Program, further proving the regression conclusion.

A possible reason is that the eastern and central regions have a higher level of economic development, and cities with a higher level of economic development are inclined to pay higher publicity costs and manpower costs in the National Civilized City Program. This has obvious advantages in resource endowment, which are more favorable in responding to the National Civilized City Program and are more conducive to the enhancement of the ESG performance of enterprises. On the other hand, the western region is relatively backward in terms of economic level and pays little attention to the policy, so the improvement brought about by the National Civilized City Program is not enough to make up for the cost of its creation. Thus, the enhancement of ESG performance is not significant and may even diminish the ESG performance of enterprises if the publicity and manpower costs are too high.

4.6.2. Heterogeneity of Enterprise Ownership

In order to examine the heterogeneity of the National Civilized City Program among different firm natures, we divided the full sample into state-owned and non-state-owned categories, as shown in columns (4) and (5) of Table 8. It is found that the National Civilized City Program significantly improves the ESG performance of state-owned firms, while it is not significant for non-state-owned firms. Meanwhile, the Fisher’s between-groups coefficient test once again verifies the difference in the role of national civilized cities concerning the ESG performance of SOEs and private firms. Possible explanations include the following: On the one hand, as a pillar of regional economic development, the special nature of an SOE as a “half-political and half-enterprise” determines that they need to take the lead in undertaking policy tasks [68] and make certain contributions to the realization of public policy objectives. The construction of a national civilized city will bring certain commendations to local policies, which is important for the promotion of local officials, and most SOEs are in charge of the construction of national civilized cities. In addition, the construction of national civilized cities will bring some recognition to local policies, which is important for the promotion of local officials, and state-owned enterprises (SOEs) are mostly responsible for undertaking the will of the government and will take the lead in carrying out the activities of production process improvement and environmental governance, thus improving ESG performance. On the other hand, due to the close relationship between SOEs and local policies, SOEs will also enjoy better policy preferences than non-SOEs, have more policy subsidies, and have a stronger willingness to cooperate with the construction of a national civilized city, as well as pay more attention to environmental protection issues and social responsibility contributions in the production and operation process.

4.6.3. Heterogeneity of Corporate Pollution Attributes

Referring to Pan et al. [68], in accordance with the characteristics of corporate pollution attributes, the full sample is divided into heavy polluting enterprises and non-heavy-polluting enterprises. The heavily polluting industries include the following: B07 (Oil and Natural Gas Extraction), B08 (Black Metal Mining and Selection), B09 (Nonferrous Metal Mining and Selection), C25 (Oil Processing, Coking, and Nuclear Fuel Processing), C26 (Manufacturing of Chemical Raw Materials and Chemical Products), C28 (Manufacturing of Chemical Fibers), C29 (Rubber and Plastic Products), C30 (Non-metallic Mineral Products), C31 (Black Metal Smelting and Rolling), C32 (Nonferrous Metal Smelting and Rolling), and D44 (Electricity and Heat Production and Supply), totaling 11 industries. The non-heavily polluting industries are the remaining industries within the primary categories B, C, and D (the same category), totaling 23 industries, which are not listed here. The empirical results are shown in columns (6) and (7) of Table 8, whereas the effect of the National Civilized City Program is insignificant in the heavy-polluting enterprise grouping. Regarding the effect of the National Civilized City Program on corporate ESG performance in the non-heavily polluting enterprise group, the promotion effect is significant at a 95% confidence interval, and this subgroup also passed the between-group coefficient test—this implies that the National Civilized City Program has an important promotion effect on the ESG performance improvement of non-heavily polluting enterprises, while the effect on heavily polluting enterprises is not significant. The possible reasons for this are the following: heavy-polluting enterprises have the characteristics of high emissions, high pollution and high energy consumption, and they need to pay higher costs to achieve the effect of environmental regulation. Thus, the policy has a limited effect on improving their environmental performance, and the enhancement of ESG performance is relatively limited. Non-heavily polluting enterprises do not have sufficiently prominent demand for their own pollution emission reduction, and it is easier for such enterprises to focus on improving their own environmental and social performances, which improves their ESG performance.

5. Conclusions and Recommendations

5.1. Conclusions

This paper constructs a quasi-natural experiment with the National Civilized City Program as an exogenous variable shock, selects the data of A-share listed companies in Shanghai and Shenzhen from 2009–2021, and constructs a multi-period double-difference model to assess, for the first time, the impact of awarding the title of the National Civilized City Program on the ESG performance of enterprises from the micro level of enterprises. The main finding of this paper is that the National Civilized City Program can significantly enhance corporate ESG performance, and its enhancement effect is still valid after the awarding of the honor. Controlling for other conditions being unchanged, the research findings pass a series of robustness tests. The National Civilized City Program mainly enhances corporate ESG performance by strengthening environmental regulations and promoting the fulfillment of corporate responsibility towards employees. Finally, from a regional perspective, the National Civilized City Program enhances the ESG performance of firms in the eastern and central regions better than in firms in the western region, and it even has a non-significant negative effect in the western region. From the perspective of firm ownership, it enhances the ESG performance of state-owned enterprises (SOEs) better than that of non-SOEs, and from the perspective of pollution attributes, it enhances the ESG performance of non-heavily polluting firms better than that of heavily polluting firms.

5.2. Recommendations

Based on the above findings, this paper proposes the following countermeasures:

First, we will strengthen the implementation and promotion of the National Civilized City Program policy and continue to promote the review of the policy. The National Civilized City Program can promote the sustainable development of enterprises and improve their ESG performance. The facts have proved the feasibility and correctness of the central government’s use of the National Civilized City Program to promote urban civilization and the development of enterprises, which is conducive to the realization of a win–win situation in terms of both economic and environmental benefits. Therefore, the government can promote and summarize the successful experiences of successfully elected national civilized cities by increasing policy propaganda, and at the same time, it should also pay attention to the social moral and cultural environment, strengthen the supervision of social public opinion, and enhance the ESG concepts of enterprise managers, so as to realize the sustainable development of enterprises.

Second, we focus on the synergy between strengthening environmental regulation policies and the National Civilized City Program. Strengthening environmental regulation policies can effectively improve corporate ESG performance. The government can raise the requirements for environmental protection, resource utilization, and ecological restoration by formulating a series of comprehensive and multi-faceted environmental regulatory policies, strengthening environmental regulations, and imposing severe penalties for environmental violations, to ensure the effective implementation of environmental regulatory policies and the smooth progress of urban policies. Secondly, the government should encourage all sectors of society to actively participate in environmental protection and strengthen the social supervision mechanism, cultivate a good sense of environmental protection, and create an atmosphere of building a civilized ecology, so as to promote the benign interaction and synergy between the National Civilized City Program and environmental regulation policy. Finally, in the National Civilized City Program, the government should strengthen the implementation of environmental protection goals and refine the broad environmental protection goals in various aspects, including clean production, energy conservation, emission reduction, water resource protection, etc., and implement corresponding environmental regulation policies for enterprises and residents to ensure the consistency of the environmental regulation policies with the goals of the city.

Third, we guide enterprises to actively fulfill their social responsibilities. The National Civilized City Program enhances the ESG performance of enterprises by encouraging them to fulfill their responsibilities to their employees, and the government improves the positive attitudes of enterprise managers by formulating relevant policies and incentives to promote the fulfillment of employee responsibilities by enterprises, thus creating a “win–win” situation between the interests of the enterprise and the interests of its employees. Secondly, the government can formulate and implement fair employment laws, working hours laws, and safety and health laws to encourage a people-centered work environment, and in addition to the economic responsibility of employees, it can strengthen the satisfaction level of other dimensions, such as employee cultural identity, to motivate employees to work hard to improve the performance of the enterprise, thus improving the ESG performance of the enterprise. In addition, a scientific and reasonable incentive index system can be established for the enterprise, taking into account financial performance, market performance, ESG performance and other dimensions to assess the performance of executives, in order to ensure that the incentive mechanism matches the enterprise’s long-term value growth and the fulfillment of social responsibility, to better stimulate the fulfillment of the enterprise’s social responsibility.

Fourth, we recommend paying attention to the enhancement of the ESG performance of non-SOEs through the National Civilized City Program. Since the effect of the National Civilized City Program on the enhancement of ESG performance of non-state-owned enterprises is not significant, state-owned enterprises should formulate and implement a perfect ESG management system, strengthen the level of disclosure of ESG information, and improve the level of ESG investment to attract market attention, so as to better disseminate the concept of corporate development and present a sustainable corporate image. In addition, non-state-owned enterprises can increase investment in resource conservation, environmental protection and green production; promote the application of clean technology and environmental protection facilities; reduce environmental impact and pollution emissions; and promote the green production and sustainable development of enterprises.

Fifth, we suggest exploring new paths for the National Civilized City Program to enhance the ESG performance of enterprises in the western region. The ESG performance of enterprises in the western region is poorly affected by the policy effect of the National Civilized City Program. Local governments can formulate relevant policies for enterprises in the western region to encourage them to actively implement environmental protection, social responsibility and good governance—for example, by providing support through the provision of tax incentives, subsidy policies and other means. Moreover, combining geographic location and historical development, and based on the differences in resource endowment, industrial characteristics, and marketization level between regions, the government can reasonably choose the implementation path of the National Civilized City Program in line with the regional characteristics and purposefully support the investment of enterprises in the western region in environmental protection and resource conservation. This will motivate more enterprises to participate in the National Civilized City Program and realize the sustainable development of local enterprises.

Sixth, there should be a focus on promoting the green transformation of heavily polluting industries according to local conditions. Since the National Civilized City Program has not had a boosting effect on the ESG performance of heavily polluting enterprises, the government can provide financial support for updating green technology and environmental protection facilities in heavily polluting industries while offering tax incentives to enterprises that adopt green production methods, increasing support for the research and development of green technology and helping enterprises to adopt cleaner production technology through policy guidance and financial support. In addition, the government can categorize and formulate relevant industrial policies to guide heavily polluting industries to transform in a green and low-carbon direction. It can formulate green transformation tasks according to industries and categorize and promote green innovative technologies, transform traditional processes, and eliminate the backward production capacity of enterprises in heavy-polluting industries according to the difficulty of different transformations, so as to guide enterprises to actively undertake social responsibility, improve their ESG performance, and promote the high-quality development of enterprises.

5.3. Further Discussion

Although the “National Civilized City Program” is a concept with Chinese characteristics, globally, many countries and regions are also pursuing the goals of sustainable development, social harmony and urban civilization. For example, Copenhagen, the world’s first carbon-neutral capital, has a green city concept that promotes low-carbon development in energy production, energy consumption, energy-efficient buildings and other aspects. Singapore’s smart city construction utilizes ICT to enhance the development level of nine economic sectors, including digital media and entertainment, education and training, financial services, tourism and retailing, and e-government. Therefore, what will the global impact be of building national civilized cities?

From the perspective of policy dissemination and impact, the National Civilized City Program can be seen as a practice of policy dissemination. The National Civilized City Program demonstrates successful experiences in improving urban civility, public services, residents’ quality of life, and corporate ESG performance. Through international conferences and city cooperation forums, China can share successful cases in the National Civilized City Program and promote the adaptation and localization of policies, thus revealing the replicability of this model globally. Analyzed from the perspective of economic exchange and cooperation, the National Civilized City Program not only improves the overall competitiveness of cities but also effectively attracts inward investment and trade. Good urban environment and infrastructure make civilized cities the core of economic activities, and this commercial attraction not only benefits the development of local enterprises but also attracts the attention of international investors, which in turn promotes Sino-foreign economic cooperation and exchanges. From the perspective of social and cultural exchanges, the National Civilized City Program not only involves the improvement of urban governance and public facilities but also often induces the improvement of cultural facilities and the enrichment of cultural activities. From the perspective of social and cultural exchanges, the construction of civilized cities involves not only the improvement of urban governance and public facilities but also the improvement of cultural facilities and the enrichment of cultural activities. For example, through cooperation and exchanges between international cities, civilized cities can become a platform for promoting cross-cultural understanding and cooperation. This cultural effect can enhance international friendship and trust, promote humanistic exchanges and cooperation, and build a global city network. To sum up, the “National Civilized City Program” is not limited to China but is a topic that can be practiced globally, especially in developing countries with similar economic conditions, market environments and development strategies.