In a nationwide field experiment involving all Chinese listed companies, we created demand for ESG actions by randomly conveying ESG rating concerns to company management teams via public online platforms. We find that many companies actively addressed these concerns by supplying detailed ESG strategies and actions. High-productivity and low-transparency companies were more likely to respond to such demand for actions. Moreover, companies that received ESG concerns improved their ESG performances over time and published more ESG reports after the experiment. In the long run, stock price responded positively to E and S inquiries while negatively to G inquiries. This divergence can be attributed to investors interpreting E and S inquiries as positive signals and G inquiries as negative signals, demonstrated through their platform interactions. Overall, the results show that companies’ ESG actions are mainly value-driven, rather than values-driven. Corporate ESG actions can be rationalized by a simple signaling model, where companies utilize costly ESG actions (similar to advertisements) to signal their quality under information asymmetry.
