Sustainability Committees and Corporate Green Innovation: Evidence from Chinese A-Share Listed Firms

Abstract

Does setting up a board sustainability committee change firms’ substantive operations, or does it merely attach a formal label to existing governance arrangements? The question is difficult to address, as committee adoption and innovation outcomes are both driven by unobserved firm traits. We exploit the staggered establishment of sustainability committees among Chinese A-share listed firms from 2007 to 2023 to identify its causal impact. Using a difference-in-differences (DID) framework with 41,189 firm-year observations, committee establishment is associated with a meaningful rise in corporate green innovation, captured by the natural logarithm of granted green patent volumes. This result remains robust to a battery of alternative specifications, including dynamic event-study regressions that show no significant pre-treatment trends, a Poisson pseudo-maximum likelihood (PPML) estimator that accommodates the count nature of patent data, a stacked difference-in-differences design that mitigates bias from heterogeneous treatment timing, high-dimensional industry-year fixed effects, sample adjustments that exclude the 2023 adoption cohort and heavy-polluting industries, entropy balancing, and alternative outcome measures based on green invention patents and a green transformation index. Three channels appear to underlie this effect. Committees promote formal environmental management and lower carbon intensity, elevate the firm’s green strategic emphasis and green transformation, and attract greater scrutiny from financial analysts and investors. The positive effect concentrates among firms located in regions with strong government environmental attention, firms with sound internal controls, and firms facing low financing constraints. The effect is statistically indistinguishable from zero for firms with weak environmental attention, weak internal controls, or severe financing constraints. The effect does not differ significantly between heavy-polluting and non-heavy-polluting industries, suggesting that it is not driven by industry-specific pollution characteristics. Overall, sustainability committees deliver tangible green innovation benefits, yet such improvements only materialize when external oversight alongside internal governance capacity and resource availability jointly support committee mandates.