Does Non-Punitive Regulation Affect Corporate ESG Performance? Evidence from Inquiry Letter Regulation

Abstract

As an important means of non-punitive regulation in the capital market, does inquiry letter regulation affect corporate ESG performance under the strategic backdrop of carbon peaking and carbon neutrality? The study finds that inquiry letter regulation significantly suppresses corporate ESG performance, and this conclusion remains valid after a series of endogeneity and robustness tests. Further analysis of the internal mechanism shows that inquiry letter regulation significantly suppresses corporate ESG performance by increasing agency costs and financing constraints. Heterogeneity analysis shows that the inhibitory effect is more pronounced among listed companies with lower audit quality and weaker internal control quality. Based on these findings, this paper proposes that stock exchanges should enhance their authority, broaden the scope of inquiry letter regulation, strengthen its regulatory effectiveness, and strictly guard against insider trading; firms should standardize their operations, proactively disclose information, and adhere to long-term ESG investment.