The impact of de-familization on ESG performance of family firms

Amid global industrial transformation and heightened sustainability imperatives, family firms are increasingly restructuring governance through de-familization as a strategic priority. Parallelly, the rise of ESG investment has shifted capital market evaluations toward holistic performance metrics, amplifying the strategic relevance of non-economic corporate objectives. Leveraging data from China’s A-share listed family firms (2009–2022), this study empirically investigates how de-familization impacts corporate ESG performance. Our findings reveal that de-familization significantly undermines ESG outcomes, a conclusion robust to endogeneity and robustness checks. Mechanism analysis identifies the erosion of family firms’ long-term orientation and executive team stability as key mediating pathways. Heterogeneity analysis further reveals stronger negative effects when family firms (ⅰ) are directly founded by entrepreneurs, (ⅱ) exhibit weak familial authority, (ⅲ) lack political connections, (ⅳ) operate under low public attention, (ⅴ) belong to non-polluting industries, or (ⅵ) reside in institutionally fragile regions. These insights advance theoretical understanding of governance-sustainability tensions in family firms and offer actionable guidance for balancing de-familization with ESG objectives, while informing policymaking to foster governance modernization and sustainable growth.