Who Deserves the Green Money? Selective Government Subsidies and ESG Commitment in China’s New Energy Sector

This study examines how government subsidies influence ESG performance in China's new energy sector, focusing on organizational mechanisms and governance conditions determining policy effectiveness. Understanding these transmission mechanisms is critical as governments worldwide deploy industrial policies to accelerate sustainable transitions, yet existing theories developed in Western market economies may not adequately explain policy outcomes in state-influenced institutional contexts. Using panel data from firm-year observations across Chinese listed firms, we test whether financing-investment maturity mismatch (SFLI) mediates the subsidy-ESG relationship and how ownership concentration and board independence moderate these effects. Our empirical strategy employs two-way fixed effects models, instrumental variable approaches, and propensity score matching to address endogeneity concerns. Results show subsidies significantly enhance ESG performance. However, SFLI shows no mediating effects, suggesting subsidies operate through institutional signaling and administrative coordination rather than financial constraint alleviation. This null mediation result proves theoretically informative, revealing that institutional mechanisms systematically outweigh resource-based channels in China's well-developed green finance environment. Contrary to agency theory predictions, ownership concentration enhances subsidy effectiveness while board independence reduces it. Comprehensive heterogeneity analyses reveal SOE subsidy effects are twice as large as POE effects, validating distinct mechanisms: administrative mandate compliance for SOEs versus strategic signaling for POEs. The positive interaction between subsidies and SOE status confirms that political accountability drives differential policy responsiveness across ownership types. Effects are strongest for environmental outcomes and exhibit diminishing returns at high subsidy levels. Regional analyses show subsidy effectiveness varies substantially with local fiscal capacity and regulatory intensity, with effects in high-capacity regions multiple times larger than in low-capacity regions. These findings offer important implications for policymakers and corporate managers. For policymakers, the evidence suggests that subsidy effectiveness depends more on institutional design and monitoring quality than on subsidy magnitude, indicating that smaller, well-targeted subsidies with strong oversight mechanisms may outperform large transfers with limited accountability. For firms with concentrated ownership structures, subsidies prove particularly effective instruments for ESG improvements, while those with highly independent boards may require additional support to overcome procedural delays.