Navigating the Knowledge Economy: Unraveling the Impact of Executive Policy Cognition on ESG Performance in China’s A-Share Listed Companies

In the ever-evolving landscape of the knowledge-based economy, the assessment of Environmental, Social, and Governance (ESG) performance has emerged as a crucial metric for gauging companies’ sustainability and responsible conduct worldwide. This study focuses on A-share listed companies in China, spanning 2011 to 2020, to unravel the interplay between executive policy cognition and corporate ESG performance. Leveraging an analysis of keyword frequency within the “Management Discussion and Analysis” (MD&A) section of annual reports, we investigate how executive policy cognition shapes the ESG trajectory of these companies. Our findings unequivocally demonstrate that a heightened level of executive policy cognition catalyzes enhanced ESG performance, underscoring the pivotal role of top-level decision-makers in steering organizations toward sustainable practices. Moreover, our study reveals that the influence of executive policy cognition on ESG performance is further magnified in the face of environmental uncertainty and heightened executive authority. Beyond establishing this foundational connection, our research delves deeper, uncovering the multifaceted mechanisms through which executive policy cognition exerts influence. From spurring environmental engineering initiatives to fostering green innovation, initiating charitable endeavors, and engaging in other relevant channels, executive policy cognition emerges as a dynamic force in shaping comprehensive ESG performance. In a world where the knowledge economy reigns supreme, this study illuminates the transformative potential of executive policy cognition in driving corporate commitment to ESG principles. As we navigate the complexities of modern business, this research serves as a valuable compass, guiding organizations toward sustainable and responsible practices that transcend traditional profit maximization.