2.1 Determinants of Strategic ESG Behavior

Strategic ESG behavior refers to a company’s actions related to ESG that do not align with its actual performance, such as false reporting, selective disclosure, or intentionally omitting important ESG information. These practices can have significant consequences, including the erosion of social trust (Gatti et al., 2021), inefficiencies in resource allocation (Liu et al., 2024), and harm to overall societal welfare (Delmas and Burbano, 2011). In response to the increasing prevalence and risks associated with strategic ESG behavior, scholars have explored its antecedents from multiple perspectives.

A substantial body of research has investigated how internal firm characteristics (e.g., firm size, performance, organizational capacity) and external influences (e.g., pressure from governments, NGOs, or market stakeholders such as consumers) shape firms’ propensity to engage in strategic ESG behavior (Delmas and Montes-Sancho, 2010; Delmas and Burbano, 2011; Kim and Lyon, 2015; Blome et al., 2017; Yu et al., 2020; Zhang, 2022). For example, Kim and Lyon (2015) find that large firms under strict regulatory scrutiny are more likely to engage in strategic ESG practices to protect their reputations; however, the presence of environmental NGOs mitigates this tendency. Delmas and Montes-Sancho (2010) show that as consumer environmental awareness grows, firms may strategically deploy ESG narratives to meet perceived green demands and gain competitive advantages. Additionally, Zhang (2022), using a sample of Chinese manufacturing firms, finds that highly polluting firms are more likely to adopt strategic ESG practices to alleviate financing constraints under green financial regulations. Similarly, Blome et al. (2017), based on 118 German multinational corporations aligned with sustainability standards, demonstrate that strategic ESG behavior is influenced by the leadership style of authoritative organizational leaders.

In recent years, a growing body of research has shifted its focus to executive characteristics, revealing that CEO power (Gull et al., 2023b), CEO overconfidence (Sauerwald and Su, 2019), CEO poverty experiences (Liu et al., 2024), and other individual attributes can significantly impact ESG-related decisions. However, most of these studies assume that the CEO’s identity and preferences remain constant over time. In reality, with the professionalization of the Chinese labor market and intensifying market competition, CEO turnover has become a strategic mechanism in corporate governance. However, little is known about whether and how successor CEOs influence strategic ESG behavior, leaving a critical gap in the literature.

2.2 Economic Consequences of CEO Succession

As the central component of a firm’s human capital, the CEO plays a pivotal role in shaping corporate strategy. Different CEOs possess distinct cognitive frameworks and strategic orientations, which can have profound and lasting effects on firm outcomes. Consequently, CEO succession is widely regarded as a critical corporate event (Hambrick and Mason, 1984).

Prior studies have proposed two primary hypotheses regarding the economic consequences of CEO succession. The ability hypothesis (Bonnier and Bruner, 1989; Huson et al., 2004; Pessarossi and Weill, 2013) posits that new CEOs possess superior managerial capabilities compared to their predecessors, especially those associated with poor firm performance. As a result, CEO turnover is interpreted by the market as a positive signal that managerial change will lead to improved firm outcomes. In contrast, the scapegoat hypothesis (Efendi et al., 2013) posits that firm performance is influenced by a combination of managerial effort and random external shocks (Kim, 1996). Therefore, a CEO may be replaced not because of personal shortcomings, but simply to appease stakeholders after poor performance. In this case, CEO succession does not convey new information about the firm’s prospects.

Given the uncertainty surrounding how capital markets interpret CEO turnover, successor CEOs often face career-related concerns and may adopt strategic behaviors to signal their leadership quality. These behaviors may include initiating mergers and acquisitions (Li et al., 2017), manipulating earnings (Ali and Zhang, 2015; Bolor-Erdene and Yoo, 2024), or engaging in aggressive tax avoidance (Li et al., 2022) to boost short-term firm performance and market perception. Ali and Zhang (2015) demonstrate that CEOs are more likely to overstate earnings during the early stages of their tenure, when their capabilities are under scrutiny. Similarly, Li et al. (2022) find that career-concerned CEOs are more inclined to engage in tax avoidance to garner favorable evaluations from their current employers.

As stakeholder expectations continue to evolve, the performance evaluation paradigm for CEOs has expanded beyond traditional financial indicators, such as shareholder returns and firm value, to include non-financial metrics like ESG performance (Hubbard et al., 2017). Recent studies suggest that strong ESG outcomes can enhance a CEO’s reputation in the executive labor market. For example, Cohen et al. (2023) find that the number of firms worldwide incorporating ESG metrics into executive KPIs is rapidly increasing. Dai et al. (2023) show that CEOs of firms with strong CSR performance are more likely to secure future leadership positions. This implies that the managerial labor market rewards ESG-conscious behavior during a CEO’s tenure. In this context, a growing body of literature has examined how career concerns shape executive decisions related to environmental governance and corporate social responsibility (CSR) disclosure. Chen et al. (2023) find that CEOs in the early stage of their tenure are more likely to voluntarily issue standalone CSR reports that disclose how they engage with stakeholders in the decision-making process, reflecting reputational motivations. Given the signaling incentives associated with CEO succession and the increasing salience of ESG performance in executive evaluations, it remains unclear whether successor CEOs are more likely to engage in authentic ESG efforts or strategic, symbolic ESG behavior. This study aims to address this gap.

2.3 Hypothesis Development

According to managerial defense theory, successor CEOs facing complex and uncertain environments may reduce strategic ESG activities as a form of self-protection to preserve their position and legitimacy (Boeker, 1997). First, successor CEOs may perceive enhancing ESG transparency and authenticity as a critical tool to establish their leadership credibility. By improving ESG practices and disclosure quality, they signal competence and ethical standards to the board and shareholders (Erhart, 2022), thereby mitigating internal pressure and consolidating their authority. Second, as stakeholder demands for transparency grow and ESG scrutiny intensifies, engaging in strategic ESG behavior—particularly symbolic or misleading actions—may pose serious reputational and legal risks for these CEOs. To avoid punitive consequences, they may become more cautious and limit symbolic ESG engagement. Third, in light of ESG’s growing role in investment decisions and firm valuation, successor CEOs may recognize that substantive ESG improvements contribute to sustainable competitive advantage. By prioritizing authentic ESG integration over symbolic gestures, such CEOs can demonstrate that the company is evolving toward more responsible and sustainable leadership. This not only reinforces their perceived integrity (Erhart, 2022) but also signals their ability to balance value creation with ESG responsibilities, enhancing their market credibility and long-term career prospects. In light of the theoretical perspectives outlined above, this study advances the following hypothesis:

Hypothesis 1a: Successor CEOs are less likely to engage in strategic ESG behavior.

Conversely, from an agency perspective, successor CEOs may be incentivized to increase strategic ESG behavior to manage impressions and enhance their legitimacy. CEO turnover often reflects the board’s dissatisfaction with prior performance (Puffer and Weintrop, 1991), placing high pressure on these CEOs to produce visible outcomes within a limited time and resources (Chen, 2015). From an attention-based view, these executives tend to focus more on short-term financial performance—where failure can lead to immediate dismissal—rather than on long-term ESG investments (Harrison and Fiet, 1999). Investing heavily in ESG without immediate returns may even be interpreted by the board as a misalignment with shareholder interests (Hubbard et al., 2017). Moreover, poor ESG perception has become a growing trigger for CEO dismissal in sustainability-sensitive markets (Chiu and Sharfman, 2018), compelling successor CEOs to build a sustainability image quickly (Chen et al., 2023). In this context, greenwashing—or the strategic manipulation of ESG disclosure—can become an appealing tactic, as it creates a favorable image at relatively low cost (Yu et al., 2020; Kim et al., 2021). Ultimately, given that substantive ESG improvements require long-term commitment and resource investment, successor CEOs seeking job security may allocate limited resources to financial performance while selectively employing symbolic ESG actions to balance their short-term career advancement goals with the firm’s long-term sustainability trajectory. Therefore, this study also proposes the hypothesis that:

Hypothesis 1b: Successor CEOs are more likely to engage in strategic ESG behavior.

3.1 Data and Sample Selection

This study’s sample comprises all Chinese A-share companies listed on the Shanghai and Shenzhen Stock Exchanges from 2010 to 2022. Following the literature, firms in the financial sector¹⁾, those classified as ST or *ST²⁾, and those with missing ESG or other financial data are excluded from the analysis. The final sample includes 1,231 unique firms and 8,783 firm-year observations. All continuous variables are winsorized at the 1% and 99% levels to mitigate potential outliers. 〈Table 1〉

Given that only approximately 19% of executives’ resumes are disclosed in the “Board and Executive Characteristics” section of the China Stock Market and Accounting Research (CSMAR) database (Huang and Guo, 2024), we undertook extensive efforts to manually collect and organize CEO resumes from companies’ financial reports and official websites. Specifically, we thoroughly examined the collected resumes to identify individuals with political and environmental backgrounds. The ESG rating data are sourced from the Wind database, firm-level variables are compiled from the CSMAR database, and regional-level data are derived from the statistical yearbooks of various provinces in China.

3.2 Variable Definition

3.3 Empirical Model

Hypothesis 1 is tested with the following Equation (2):

$StrategicESG_{i,t/t+1} = \beta_0 + \beta_1 SuccessorCEO_{i,t} + \sum \beta_n Controls_{i,t} + Fixed Effect + \varepsilon_{i,t}$ (2)

where the subscripts $i$ and $t$ refer to the firm and year, respectively. The dependent variable is the firm’s strategic ESG behavior ($StrategicESG_{i,t/t+1}$), measured either in the same year as the CEO succession ($t$) or in the following year ($t+1$), which helps us capture both immediate and slightly delayed responses to leadership change.

The key independent variable of interest is $SuccessorCEO_{i,t}$.

Controls are the set of control variables commonly used in prior strategic ESG studies.

Building on prior research (Jin et al., 2024), we examine several firm financial characteristics that may influence a firm’s strategic ESG behavior. These factors encompass firm size (Size), leverage (Lev), return on assets (ROA), firm age (Age), state ownership (Soe), board size (Boardsize), board independence (Indep), ownership concentration (Top10), duality (Dual), market-to-book ratio (MB), and economic development level (GDP). This study further controls for CEOs’ individual characteristics, including CEO age (CEOAge), CEO education (CEODegree), and CEO gender (CEOGender). We incorporate industry (Industry) and year (Year) fixed effects to control for industry-and time-specific factors.

Additionally, we employ robust standard errors and firm-level clustering adjustments in all OLS regression models to enhance the robustness of our findings (Petersen, 2008). The variables utilized to test the hypothesis are detailed in <Appendix A>, with a particular focus on the significant coefficient $\beta_1$ in Eq. (2).

4.1 Descriptive Statistics

Table 2

strategic ESG behavior ($StrategicESG$) is -0.319, indicating that, on average, firms in our sample tend to perform better in ESG practices than in ESG disclosure. This pattern aligns with previous findings (e.g., Jin et al., 2024) and may indicate relatively conservative ESG disclosure practices, particularly among firms that engage in meaningful ESG activities but underreport them due to limited transparency incentives or weak disclosure standards. The minimum value of $StrategicESG$ is -2.636, and the maximum is 3.086, indicating substantial variation in strategic ESG engagement across firms. Regarding CEO succession, the mean value of $SuccessorCEO$ is 0.169, indicating that approximately 16.9% of the sample firms experienced a change in CEO during the observation period. Regarding the personal characteristics of successor CEOs, 22.9% also serve as board chairpersons, and the majority are male, with an average education level above the undergraduate level. The summary statistics for the remaining control variables are generally consistent with findings in prior empirical research.

The un-tabulated Pearson correlation test indicates a significantly positive correlation between $SuccessorCEO$ and $StrategicESG$, providing preliminary evidence that firms led by successor CEOs are more likely to engage in strategic ESG behavior.

4.2 Main Regression Results

Table 3

In both specifications, the coefficient on $SuccessorCEO$ is positive and statistically significant, indicating that firms led by successor CEOs are more likely to engage in strategic ESG behavior. Specifically, the coefficient in Column (1) is 0.094 (t-stat. = 3.057), and remains significant in Column (2) at 0.052 (t-stat. = 2.180), suggesting that the effect is not limited to immediate disclosures but extends into the following fiscal year.

This finding provides empirical support for the argument that successor CEOs may strategically manipulate ESG disclosures to enhance their reputations or signal leadership effectiveness, particularly in the early stages of their tenure, when career-related concerns are heightened. Overall, these findings underscore the importance of leadership transitions in shaping firms’ non-financial disclosure strategies and highlight the symbolic use of ESG as a strategic tool by newly appointed executives.

5.1 Moderator Analysis: How Does the Successor CEO Impact Strategic ESG Behavior?

The main results indicate that firms led by successor CEOs are more likely to engage in strategic ESG behavior. We attribute this finding to the career concerns faced by newly appointed CEOs. CEO turnover is often prompted by the board’s dissatisfaction with prior performance (Puffer and Weintrop, 1991), placing successor CEOs under significant pressure to deliver visible and immediate results within a limited timeframe and with constrained resources, in order to avoid dismissal (Chen, 2015). Moreover, in sustainability-sensitive markets, poor ESG perception has become an increasingly important factor contributing to CEO turnover (Chiu and Sharfman, 2018), further motivating newly appointed CEOs to quickly construct a favorable sustainability image (Chen et al., 2023). Therefore, in this section, we further examine whether two career-related considerations moderate the positive association between CEO succession and strategic ESG behavior. Specifically, we conduct subgroup regressions and compare the estimated coefficients of $SuccessorCEO$ across groups to examine whether politically connected successor CEOs and those with environmentally relevant personal backgrounds differ in their likelihood of engaging in strategic ESG behavior. A visual summary of the group-wise effects is provided in <Appendix B>.

5.2 Cross-sectional Analysis: Institutional Ownership

Institutional investors are often regarded as sophisticated and influential stakeholders who play a crucial monitoring role in corporate governance (Bushee, 2001; Gillan and Starks, 2003). Companies with significant institutional ownership are subject to greater external scrutiny, particularly regarding ESG performance and disclosure (Dyck et al., 2019). Consequently, successor CEOs in these companies face tighter oversight and fewer opportunities to undertake symbolic or strategic ESG actions without being noticed.

In contrast, when institutional ownership is relatively low, firms face weaker monitoring, giving CEOs more discretion in shaping disclosure practices. Successor CEOs in such settings may have greater freedom to strategically manage ESG narratives to signal competence or to build a sustainability image early in their tenure, especially when formal ESG performance metrics take longer to emerge. Therefore, we expect the positive link between CEO succession and strategic ESG behavior to be stronger when institutional ownership is low.

We split the sample into two subgroups based on the level of institutional ownership. Firms with institutional shareholding above the median were classified as high institutional ownership (High IO), while those below the median were classified as low institutional ownership (Low IO). We re-estimated Eq. (2) for each subgroup, and the results are shown in Table 6

As shown in Columns (1) and (2) of Table 6

As shown in Columns (1) and (2) of Table 6, the coefficient on $SuccessorCEO$ is positive and statistically significant in the low institutional ownership group (coefficient = 0.111, t-stat. = 2.602), while the coefficient is not statistically significant in the high institutional ownership group. These results support our argument that in firms with lower institutional ownership, monitoring mechanisms are less stringent, allowing successor CEOs greater discretion to engage in symbolic ESG practices, thereby enhancing their reputation and demonstrating leadership legitimacy. In contrast, in firms with high institutional ownership, stricter monitoring and accountability lessen the likelihood of such symbolic actions, thereby weakening the influence of CEO succession on strategic ESG engagement.

5.3 Robustness Tests

To validate the robustness of our findings, we conduct several tests: controlling for predecessor CEO characteristics and firm fixed effects, using two-stage least squares method, and applying entropy-balancing estimation. The results are presented in Table 7

6.1 Summary of Findings

This study investigates whether successor CEOs influence corporate strategic ESG behavior. Using panel data from Chinese listed firms, our findings suggest that companies led by successor CEOs are more likely to exhibit strategic ESG behavior. We attribute this pattern to the heightened career concerns and performance pressure faced by newly appointed CEOs. With limited time and resources, successor CEOs tend to prioritize short-term financial results while maintaining a sustainability image through symbolic ESG practices. These results align with prior research indicating that newly appointed CEOs may employ impression-management strategies, such as greenwashing, to protect their positions (Ali and Zhang, 2015).

Furthermore, we find that this positive relationship is attenuated when CEOs possess political or green-related experience, as such backgrounds may alleviate career pressure and reduce the need for symbolic ESG signaling. Politically connected CEOs are more likely to access external government resources and subsidies, thereby easing financial constraints. Likewise, CEOs with environmentally relevant backgrounds already have a pro-sustainability image, which reduces the incentive to artificially boost ESG disclosure.

6.2 Discussions

Our findings underscore the significance of leadership changes as a governance event that can profoundly affect a firm’s ESG strategy, particularly through symbolic actions. By linking CEO succession to strategic ESG behavior, this study contributes to the growing body of research on executive influence in ESG decision-making. Additionally, our results extend the upper echelons theory by demonstrating that the effect of CEO traits on firm behavior evolves rather than remaining constant. In particular, newly appointed CEOs may intentionally engage in symbolic ESG actions to shape perceptions and earn stakeholder approval. This supports the idea that CEOs act as “agents of legitimacy,” especially during the vulnerable early period of their leadership when external criticism and internal uncertainty are at their peak.

An alternative explanation is that the gap between ESG disclosure and practice reflects a temporary misalignment rather than a deliberate strategy. For instance, newly appointed CEOs may initially be unfamiliar with internal operations, ESG systems, or data reporting processes, which can lead to unintentional discrepancies early in their tenure. However, several patterns in our findings indicate this explanation is inadequate. First, ESG disclosure in our context is voluntary mainly and requires intentional managerial effort, thereby signaling strategic intent. Second, we observe that the effect is notably stronger among successor CEOs with political connections or experience in green-related fields, traits typically associated with career incentives and reputational concerns. This pattern supports the view that successor CEOs deliberately engage in symbolic ESG behavior to enhance legitimacy during a leadership transition.

These findings have several practical implications. Firms undergoing CEO succession should be aware of the potential ESG risks associated with leadership changes. Although some transition-related friction may occur, the evidence suggests a deliberate and strategic process. Boards should stay alert to the reputational motives and career concerns of successor CEOs and develop ESG-related incentives that promote genuine, long-term sustainability efforts. Aligning ESG objectives with executive compensation can help newly appointed CEOs adopt a long-term outlook and recognize the strategic importance of ESG.

Additionally, we discover that robust external governance and stakeholder oversight can help limit shallow ESG actions. We advise stakeholders to include ESG-related clauses in CEO contracts to prevent greenwashing and improve accountability for meaningful ESG results. Finally, creating balanced performance assessment systems is crucial to prevent CEOs from focusing solely on short-term financial goals at the expense of long-term environmental and social objectives.

6.3 Limitations and Future Research

Despite the robustness of our empirical results, this study is subject to several limitations that offer opportunities for future research.

First, while the construction of strategic ESG provides a meaningful way to identify differences between ESG disclosure and actual practice, the two ESG ratings used in this calculation (i.e., Bloomberg ESG for disclosure and Hua Zheng ESG for practice) are not “pure” indicators of either disclosure or substantive performance. Although Bloomberg’s approach prioritizes narrative ESG disclosure from voluntary corporate reports and public filings, and Hua Zheng focuses on measurable ESG actions and policy outcomes, both systems inevitably overlap. This is because ESG ratings are inherently composite indicators lacking a universally accepted definition, and their methodologies are often proprietary and multidimensional (Berg et al., 2022). For instance, Bloomberg’s disclosure score may partially reflect actual practices when performance is prominently reported, while Hua Zheng’s practice score could be affected by the transparency and accessibility of firm disclosures. Therefore, our measure of strategic ESG captures a directional gap between disclosure and performance but does not fully separate the two domains.

We recommend that future research develop or incorporate more refined ESG metrics that can better distinguish narrative disclosure from actual ESG actions. This might include combining text-based disclosure analysis with objective performance measures or exploring alternative ESG evaluation sources using transparent, domain-specific methods. Such improvements would lead to a more accurate assessment of the distinction between symbolic and substantive ESG efforts, providing a stronger basis for examining firms' strategic motives in sustainability reporting.

Second, while our study focuses on Chinese listed firms, the institutional and regulatory environment in China may limit the generalizability of our findings. The strategic use of ESG may vary substantially across countries due to differences in disclosure regimes, investor pressure, and stakeholder expectations. Future research could apply our framework to other emerging or developed markets to assess the consistency of these patterns in varying institutional settings.

Moreover, although we consider a range of CEO background traits, including political experience and green-related expertise, unobservable qualities such as leadership style, ethical orientation, or personal values may also affect ESG decisions, as Mason and Hambrick (1984) suggest. Future research may examine additional personal traits or use survey-based data to investigate deeper behavioral drivers of strategic ESG choices.

Finally, the symbolic use of ESG disclosure may be front-loaded at the beginning of a CEO's tenure and then gradually decrease as their tenure lengthens, and the organization's credibility stabilizes. Clarifying whether strategic ESG behavior is truly a temporary, career-driven tactic or a lasting feature of executive leadership remains an important area for future research. Future studies could empirically examine this pattern by including interaction terms between CEO tenure and strategic ESG behavior, or by using longitudinal data to observe how disclosure-practice divergence changes over time.