Incentivising change: The role of subsidies in stimulating sustainability
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2025-07-04
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en
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This study aims to unveil the influence of subsidy allocation on corporate Environmental, Social, and Governance (ESG) performance, thereby complementing existing studies that primarily aim at the influence of sustainability performance on subsidies. Anchored in the substitution argument from the tax avoidance literature, this study expects subsidies to act as a replacement for private financing to increase corporate ESG performance. By merging subsidy data from the Good Jobs First Subsidy Tracker (GJF ST) and ESG and control variables from the London Stock Exchange Group (LSEG), the analysis covers 9,980 US firm-year observations across 2014-2023. Through a staggered difference-in-difference (DiD) design using the Callaway & Sant’Anna (CS) estimator, the findings provide suggestive evidence of a positive influence of subsidy on ESG performance. It implies that firms might bolster their sustainable behaviour through investing in initiatives when leveraging on the funds they free up when being granted a subsidy. This study underscores the potentialities to government authorities and corporations alike to align their agendas and interests, positioning subsidy allocation as a catalyst for sustainability.
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Faculteit der Managementwetenschappen