sustainability
Article
Empirical Analysis of the Impact of Top Management Team
Social Networks on the Homophily Effect of ESG Disclosure
in Companies
Jing Zhang and Ziyang Liu *
Citation: Zhang, J.; Liu, Z. Empirical
Analysis of the Impact of Top
Management Team Social Networks on
the Homophily Effect of ESG Disclosure
in Companies. Sustainability 2023, 15,
11989. https://doi.org/10.3390/
su151511989
Academic Editors: Ştefan
Cristian Gherghina and Jacob
Arie Jordaan
Received: 26 June 2023
Revised: 27 July 2023
Accepted: 31 July 2023
Published: 4 August 2023
Copyright: © 2023 by the authors.
Licensee MDPI, Basel, Switzerland.
This article is an open access article
distributed under the terms and
conditions of the Creative Commons
Attribution (CC BY) license (https://
creativecommons.org/licenses/by/
4.0/).
Sustainability 2023, 15, 11989. https://doi.org/10.3390/su151511989
Graduate School, Kyonggi University, Suwon 16227, Republic of Korea; zhangjing@kgu.ac.kr
* Correspondence: victor@kgu.ar.kr
Abstract: This study investigates the homophily effect in corporate information disclosure, specifically
focusing on executive social networks. We analyze data from 385 privately listed companies in China’s
Growth Enterprise Market between 2018 and 2021. An OLS regression model is employed to examine
the presence of a homophily effect in ESG information disclosure by private enterprises, along
with regional and industry variations. Additionally, we utilize a moderation effect model to assess
the influence of executive social networks on the homophily effect of ESG information disclosure.
We conduct robustness tests based on our findings. The results indicate a significant homophily
effect in ESG information disclosure by private enterprises, with varying magnitudes across regions
and industries. Furthermore, executive social networks positively moderate the homophily effect,
suggesting that a more diverse social network among the executive team enhances the homophily
effect of ESG information disclosure for private enterprises. These findings offer valuable insights for
corporate low-carbon sustainable development.
Keywords: executive social networks; ESG information disclosure; homophily effect; private enterprises
1. Introduction
The “China Listed Companies ESG Development White Paper (2021)” reveals that as
of June this year, over a thousand listed companies have disclosed ESG-related information,
accounting for approximately one-fourth of all listed companies. This is a significant
increase compared to only 317 companies in 2009. Notably, out of the constituents of
the CSI 300 Index, 248 companies have published annual ESG reports, accounting for
over 82%. The future focus is on strengthening the disclosure of ESG information. The
“Guidelines for Corporate Governance of Listed Companies” in 2018 provided a significant
description of its content framework. In 2021, the China Securities Regulatory Commission
listed “enterprises should consciously provide relevant information to investors and fulfil
corresponding obligations to protect their legitimate rights and interests from infringement”
as one of the essential provisions.
ESG encompasses responsibilities in the areas of environment, society, and corporate
governance. ESG information disclosure refers to the actions taken by companies to reduce
market information asymmetry, enhance the company’s social reputation, improve social
relationships, and meet the information demands of investors and other stakeholders. It
involves the specific disclosure of information related to the company’s environment, society,
and corporate governance. These are obligations and responsibilities that the company
should fulfil throughout an accounting year through paper or online reports [1]. In the
process of corporate management, the homophily effect refers to the phenomenon where a
particular activity undertaken by one or more companies in a group leads to the simultaneous
adoption of the same activity by other companies, resulting in imitation and convergence
of behavior among companies. The concept of social networks refers to the relationship
network established through communication and contact among individuals within a team.
https://www.mdpi.com/journal/sustainability
Sustainability 2023, 15, 11989 2 of 14

Social networks utilize interpersonal communication and contact to control social activities.
In a company, senior executives can use social information to formulate the company’s
development plans and corresponding business policies and increase public awareness [2].
In recent years, the changes in the behavior of companies within the same group, espe-
cially within the same industry, have attracted extensive attention due to the emergence of
homophily theory in social psychology. This has provided new directions for research on
corporate information disclosure. However, current research lacks an in-depth exploration
of the impact of executive information acquisition channels on the homophily effect of ESG
information disclosure by companies. This is primarily due to the difficulty in accurately
measuring executive information acquisition channels. Social network analysis provides
a new approach for this research, as information dissemination relies on diverse social
networks, which broaden the executive’s information acquisition channels [3]. Therefore,
the number of decision-maker social network channels and the company’s ability to acquire
information are closely related, resulting in a strong degree of dependence on homophilic
companies. Companies utilize social networks to acquire information and reflect it in their
ESG information disclosure decisions. This study examines privately listed companies in
the Growth Enterprise Market from 2018 to 2021 and conducts a comprehensive analysis of
the social network information of relevant executive teams. It considers aspects such as
the number of concurrent appointments, educational background, positions as political
advisors or representatives, banking work experience, and association positions [2]. Sub-
sequently, relevant models are established to explore whether there is a homophily effect
in ESG information disclosure by sample companies, and regression methods are used to
determine the relationship between the two.
This article’s innovations are as follows: First, existing literature mostly analyzes
executive social networks or the homophily effect of information disclosure separately,
with limited research on the influencing factors of the homophily effect of ESG information
disclosure by companies. This article enriches the research on the homophily effect of
corporate behavior by constructing a research model that examines the impact of mimetic
behavior on the level of ESG information disclosure by companies. Second, evaluating
the social network of executive teams based on five components expands the depth and
breadth of research on corporate social networks. The research findings indicate that these
five factors influence the social network, demonstrating the feasibility of this approach.
Therefore, the conclusions of this study have practical implications for privately listed
companies in terms of ESG information disclosure. Third, analyzing the homophily effect
from the perspectives of regions and industries further expands the relevant research topics
of the homophily effect.

2. Literature Review and Research Hypotheses

2.1. Mechanisms of Homophily in Information Disclosure Behavior
In a specific group, individuals are influenced by the behavior of other group members,
leading to a change in their own behavior to align with others. Homophily studies the
relationship between individual characteristics and the average characteristics of group
members [4]. Similar phenomena, such as the “herding effect” [5,6], the “contagion ef-
fect” [7], and the “surge effect” [8], have been observed and explained. The presence of
homophily within groups has been revealed through studies on interactions and mutual
influences among individuals. Incorporating group influence into the interaction between
individuals and the market expands the theoretical framework of classical economics
and has important theoretical and practical implications. Traditional studies in corporate
finance often overlook the influence of other companies on decision making and treat fi-
nancial strategies as independent decisions. However, research on interactions and mutual
influences among individuals has shown the presence of homophily within groups [9]. In
real situations, the decisions of other companies can impact a company’s own decision
making, leading to group effects in company decision making [10]. Previous research
has demonstrated that the financial decisions of certain companies are influenced by the
Sustainability 2023, 15, 11989 3 of 14

decisions of peer companies, with far-reaching effects on their financial decisions. As

the economic and market environment changes, more companies choose to enhance their
competitiveness and increase profits through cooperation with other companies. Leary
and Roberts noted that companies consider information from industry peers when making
financing decisions and incorporate it into their own decisions [11]. Kaustia and Rantala’s
research indicated that companies make stock issuance decisions based on the behavioral
performance of other companies in the same industry, suggesting the presence of group
effects in stock issuance decisions. These effects arise due to information asymmetry among
companies in the same industry and competition among industry firms [12]. Bratten et al.
found that companies with a higher market value in an industry are considered “leaders”,
while companies that imitate the behaviors of these leaders are called “followers”, implying
that follower companies’ operational decisions are greatly influenced by leader companies
in terms of earnings management decisions [13]. Kedia et al. argued that group effects
influence corporate earnings management decisions. This study analyzes the impact and
mechanisms of different types of companies in the stock issuance process by examining
representative companies within the industry. In recent years, domestic scholars have also
conducted in-depth studies on the daily decision making of companies and their roles and
mechanisms within industries [14]. Based on previous literature, some scholars suggest
that companies become aware of their peers’ merger and acquisition plans in advance
and formulate favorable strategies with sufficient information support [15]. Kyissima et al.
pointed out that companies refer to the decisions of their peer companies when selecting a
capital structure to ensure the rationality and sustainability of their decisions [16,17]. Li
proposed that industrial policies significantly influence investment homophily [18].
There is some research on regional homophily. For example, some researchers have
found that companies within the same region tend to adopt similar financial strategies. If
two companies are geographically close, it can stimulate sparks of technological innovation.
Parson et al. pointed out that there is regional homophily in corporate financial illegitimacy
tendencies [19]. Lu Rong and Chang Wei believed that corporate misconduct exhibits
regional homophily, and violations in information disclosure are more pronounced [20].
Rashid et al. argue that excessive corporate debt will exhibit significant group effects
within the same region, and these group effects will impact the operation of companies.
Strong group effects will lead to excessive debt and overinvestment by companies, thereby
weakening their debt repayment, profitability, and other issues. Starting from the causes
of group effects, the authors analyze the issue of excessive corporate debt and provide
strategies and recommendations [21]. Scholars have extended the study of group effects
to government policy formulation, which goes beyond the corporate level. Deng and
Zhao verified that local governments exhibit group effects when making major decisions,
and the study shows that this kind of group effect among local authorities occurs in
regions with similar characteristics in the same province and comparable levels of economic
development [22]. Meyer explored the formation mechanisms and influencing factors of
three different types of corporate information disclosure group effects in listed heavy-
polluting industrial companies to verify whether there is a group effect in environmental
information disclosure by listed companies in China [23]. Neo-institutionalism advocates
simulating individuals’ decision making and behavior towards others in the same situation
to achieve organizational stability and gain recognition of “legitimacy” [24]. In addition,
DiMaggio and Powell proposed three mechanisms: coercion, imitation, and social norm
mechanisms [25]. Subsequently, Haunschild and Miner identified three aspects that are
mainly present when organizations imitate target selection: frequency-based imitation,
feature-based imitation, and outcome-based imitation [26]. Among them, frequency-based
imitation is the most common and representative. This article aims to explore the group
effects of corporate ESG information disclosure decisions and deeply investigate their
influencing mechanisms through frequency simulation studies.
Companies tend to imitate the structures and behaviors adopted by the majority of
other companies, and this imitation is based on frequency [27]. This imitation between com-
Sustainability 2023, 15, 11989 4 of 14

panies can be seen as a rationalization and legitimization of organizational structures [28].

Therefore, decision-makers in information disclosure only need to meet the minimum
standards of mutual imitation, without striving to be the best. Otherwise, it may attract
attention and bring hidden risks to future development. Based on this convention, compa-
nies make their own decisions based on the imitation of other companies. This view has
been confirmed by numerous scholars and is recognized as truth. Some scholars also point
out that with the widespread application of corporate social responsibility information
disclosure in the entire industry, imitation by other companies has become more common,
and the pressure for conformity among companies has increased [29]. Boateng’s research
on the social responsibility disclosure of listed companies in China found that 85% of the
sample companies based their disclosure intentions, timing, and level on China’s general
standards [30]. Shen also found that the pressure for convergence not only affects the
behavior of corporate information disclosure but also interferes with its quality [31].

Hypothesis 1A. Corporate ESG information disclosure is positively correlated with the average
level of ESG information disclosure by other companies in the same region, indicating the presence
of group effects.

Hypothesis 1B. Corporate ESG information disclosure is positively correlated with the average
level of ESG information disclosure by other companies in the same industry, indicating the presence
of group effects.

2.2. The Influence of Executive Social Networks on the Group Effects of Corporate ESG
Information Disclosure
Both companies and individuals are individuals situated within various network
relationships, and the external environment in which they operate has a profound impact
on them. There are various connections between companies and the environment. As a
company, it must constantly engage in resource exchange with the external world to obtain
various resources and information necessary for sustainable development. Therefore, com-
panies need to rely on external forces to maintain and promote their continuous growth and
expansion. To gain advantages in fierce market competition, companies must rely not only on
internal knowledge, human, material, and financial capital but also on the support of external
social capital to ensure their competitive advantage. Companies have numerous interrelated
social relationships with the outside world, forming a complex network structure known as
the external social network. The various resources possessed by companies can be effectively
utilized and accessed, which is referred to as external social capital, and social networks are an
important form of social capital. Social capital can help companies obtain market opportunities
in terms of new products, services, technologies, and other related economic benefits [32].
Therefore, establishing a broad corporate social network is a recommended measure to promote
interaction and cooperation between companies and society.
Social networks are an important means for people to collect and disseminate hard-
to-obtain information. With social networks at the core, you can gain more information
from the Internet [33,34]. Portfolio managers hold a tighter grip and achieve higher returns
on companies with social networks, indicating that social networks can convey important
information in the stock market [9]. Establishing social network connections between
corporate banks and bankers can effectively reduce loan costs and mitigate information
asymmetry [35]. In the Internet era, a company’s management activities depend more on
understanding market conditions, competitors, customers, and other factors, which are
communicated and feedbacked through the Internet. Leveraging informational advantages,
the Internet can deliver valuable information to companies, thereby improving their deci-
sion making [36]. Additionally, non-informational transmission methods such as political
favors can also bring tangible benefits to companies [37]. The Internet has a significant
impact on corporate decision making and is one of the important ways for companies to
adjust their strategies and enhance their competitiveness. One of the advantages of the
Sustainability 2023, 15, 11989 5 of 14

Internet is the phenomenon of knowledge spillover, where certain information in the net-
work can be utilized by other members, thus forming a unique mechanism of information
sharing [38]. Moreover, a company’s position can be seen as an effective means of substi-
tuting for explicit control arrangements. Therefore, the importance of networks depends
on the relationships between network members and the degree of connection between the
network and the external market. In the field of venture capital, network members can
collaborate to suppress potential competitors, such as raising entry barriers and increasing
economic rents for incumbent employees [39]. The information shared among network
members is not only valuable in itself, but its credibility also allows the establishment of or
damage to reputation capital [40]. Reputation capital is a form of social capital embedded
in director networks. Companies associated with financial firms are more likely to adopt
higher levels of corporate financing [41], and companies with well-developed networks can
improve their performance through network resources [42]. Social network connections
play a crucial role in the director labor market, as connections or involvement in other
networks strongly incentivize directors to enter company boards [43].
Regarding the study of social networks, GAYE suggests that social networks promote
the risk-taking ability of corporate decision making [44]. Wang points out that companies
within clusters may vary their migration choices based on the diversity and core density
of their networks [45]. Garst indicates that network financing effectively reduces costs for
banks and companies through information transmission while also increasing a company’s
turnover, which is beneficial for its long-term development [46]. Chan points out that
having rich social network relationships can acquire social capital; however, excessive
reliance on social network relationships may lead to biases within a company, thereby
inhibiting the acquisition of entrepreneurial resources [47]. Rudd highlights that the key
to a company’s financial activities depends on the control and informational advantages
brought about by changes in the position of “structural holes” [48]. Liao suggests that
the division of labor in the global agricultural value chain is influenced by the centrality,
connection strength, and heterogeneity of the network [49]. Capelle-Blancard suggests
that policy-based intermediaries emphasize information fairness and justice due to their
economic independence. Local media has a significant advantage in obtaining information,
challenging the market competition of private information transactions, whereas there is
no apparent relationship between remote media and private information transactions [50].
Sierdovski argues that the concentration of human capital in social networks is significantly
positively correlated with a company’s innovation ability among listed companies [51].
Based on the literature mentioned above, this study proposes the following hypothesis:

Hypothesis 2. Executive social networks have a positive moderating effect on the group effects of
ESG information disclosure.

3. Research Design
3.1. Sample Selection
This study specifically focuses on privately listed companies in the Growth Enterprise
Market (GEM) between 2018 and 2021. Companies with ST status and those with missing
data were excluded, resulting in a sample of 385 companies and 1540 observations. The ESG
information disclosure level of the companies was obtained from the WIND database, while
other variables were sourced from the CSMAR database. The industry names were based
on the new industry classification standards for listed companies published by the China
Securities Regulatory Commission (CSRC). The sample companies were located in different
regions, including North China, northeast China, East China, central China, South China,
southwest China, and northwest China. Data processing was performed using SPSS 26.

3.2. Variable Definitions

The dependent variable is the ESG information disclosure level. The study utilizes the
WIND database’s ESG composite score to measure the level of ESG information disclosure.
Sustainability 2023, 15, 11989 6 of 14

The score, ranging from 1 to 10, combines the management practice score (70%) and the
controversy event score (30%). It assesses companies across three dimensions, twenty-
seven issues, and over three hundred indicators, providing a comprehensive evaluation of
a company’s ESG management practices and its ability to address significant unexpected
issues. The independent variable was the executive social network. The social network
of the top management team, to some extent, represents the company’s overall social
network. The richness of the executive team’s social network significantly influences the
company’s information acquisition. This study considers the following five dimensions of
the executive social network:
Directorships in other companies: if the ratio of executive team members holding
positions in other companies exceeds the market average, the variable “Net1” is assigned a
value of 1; otherwise, it is assigned a value of 0.
Educational background: if the ratio of executive team members with a master’s
degree or above exceeds the market average, the variable “Net2” is assigned a value of 1;
otherwise, it is assigned a value of 0.
Serving as deputies in CPPCC/NPC: if the ratio of executive team members who have
been elected as deputies to the Chinese People’s Political Consultative Conference (CPPCC)
or National People’s Congress (NPC) exceeds the market average, the variable “Net3” is
assigned a value of 1; otherwise, it is assigned a value of 0.
Banking work experience: if the ratio of executive team members with previous work
experience in banks exceeds the market average, the variable “Net4” is assigned a value of
1; otherwise, it is assigned a value of 0.
Association service history: if the ratio of executive team members with a history of
serving in associations exceeds the market average, the variable “Net5” is assigned a value
of 1; otherwise, it is assigned a value of 0.
The executive social network value is calculated using the above variables. It ranges
from 0 to 5, with higher values indicating a richer social network and lower values indicat-
ing a less diverse network.

Net = Net1 + Net2 + Net3 + Net4 + Net5

Control variables (Table 1): to mitigate the influence of other internal and external
factors on ESG information disclosure and ensure the independence of social networks, the
following variables are introduced as control variables.

Table 1. Definitions of Control Variables.

Control Variable Name Variable Symbol Variable Definition

Financial Leverage Alr End-of-year total liabilities divided by end-of-year total assets
Board Ownership Num Total number of directors holding shares in the company
Firm Size Size Natural logarithm of total assets at the end of the year
Profitability ROE Return on equity
Whether the chairman and CEO positions are held by the same person
Dual Roles Dual
(1 if yes, 0 if no)
Board Size Board Number of members on the board of directors
Ownership Concentration Crio Percentage of shares held by the largest shareholder
Proportion of Independent
Out Number of independent directors divided by the total number of directors
Directors
Asset growth rate: (end-of-period total assets—beginning-of-period total
Company Growth Growth
assets) divided by beginning-of-period total assets
Sustainability 2023, 15, 11989 7 of 14

3.3. Model Design

Based on Hypotheses 1A and 1B, this study constructs the following models:

ESGi,t = β0 + β1 market1i,t−1 + β2 ESGi,t−1 + ∑ βj Controlsj,i,t + ∈ i,t (1)

ESGi,t = β0 + β1 market2i,t−1 + β2 ESGi,t−1 + ∑ βj Controlsj,i,t + ∈ i,t (2)

In Models (1) and (2), ESGi,t represents the level of ESG disclosure of company i in
period t, market1i,t−1 represents the average level of ESG disclosure of other companies in
the same region as company i in the previous period t − 1, ESGi,t−1 represents the level of
ESG disclosure of company i in the previous period t − 1, and market2i,t−1 represents the
average level of ESG disclosure of other companies in the same industry as company i in
the previous period t − 1. Controlsj,i,t represents the control variables, with j indicating the
variable index, and εi,t represents the error term.
For Hypotheses 2, the interaction term Neti,t × Market1i,t−1 is included to investigate
the moderating effect of social networks. The models are as follows:

SGi,j = β0 + β1 Market1i.j−1 + β2 Neti,j + β3 Neti,j × Market1i,j−1 + β4 ESGi,t−1 + ∑ βj Controlsj,i,t + εi,j (3)

ESGi,j = β0 + β1 Market2i.j−1 + β2 Neti,j + β3 Neti,j × Market2i,j−1 + β4 ESGi,t−1 + ∑ βj Controlsj,i,t + εi,j (4)

In Models (3) and (4), the variables Net, Market1, and Market2 are centered to improve
the fit of the moderation effect model.

4. Empirical Results Analysis

4.1. Descriptive Statistics and Correlation Analysis
Table 2 presents the descriptive statistics for each variable. The variable “ESG dis-
closure level” shows a relatively balanced distribution, with minimal difference between
the median and mean values. The variable “top management team social networks” also
exhibits a small difference between the mean and median values, indicating a certain degree
of unbiasedness in its distribution. The number of directors holding shares in the company
ranges from 0 to 8, with a small difference between the mean and median values, suggesting
that 50% of the companies have a relatively low total number of directors holding shares.
The company size ranges from 19.53 to 26.45, with small differences between the samples,
indicating a relatively even distribution.

Table 2. Descriptive Statistics of Variables.

Variable Mean Median Standard Deviation Minimum Maximum

Net 1.8519 2 1.16206 0 5
Alr 0.3594 0.3517 0.17801 0.03 1.4
Num 3.22 3 1.587 0 8
Size 21.6387 21.5294 0.91988 19.53 26.45
ROE 0.0134 0.0685 0.66755 −19.67 5.32
Dual 0.49 0 0.5 0 1
Board 7.7 7 1.446 4 13
Crio 0.2706 0.2522 0.11814 0.03 0.75
Out 0.3883 0.4 0.05323 0.2 0.75
Growth 0.1591 0.1015 0.34133 −0.93 5.85

The net return on assets shows a wide range of values, with a maximum of 5.32 and a
minimum of −19.67. The number of members on the board of directors ranges from 4 to 13,
with an average of 7.7 and a median of 7, indicating that the majority of companies have a
Sustainability 2023, 15, 11989 8 of 14

board size of 7 or more. The average shareholding proportion of the largest shareholder in
most companies is 27.06%, and the asset growth rate is above 10.15%.
According to Table 3, the ESG disclosure level shows significant positive correlations
with Market1 and Market2 and a significant negative correlation with the variable Net.
Additionally, the ESG disclosure level exhibits significant positive or negative correlations
with the control variables Board, Out, Dual, Alr, Size, Roe, Growth, Crio, and Num,
suggesting the need to control for these variables in the analysis.

Table 3. Correlation Analysis of Variables.

ESG Net Crio Dual Market1 Market2 Board Out Num Size ROE Alr Growth
ESG 1
Net −0.034 ** 1
Crio 0.104 ** −0.013 1
Dual −0.036 * 0.013 0.056 * 1
−0.103
Market1 0.161 *** −0.035 −0.015 1
**
Market2 0.484 ** −0.042 * −0.027 0.021 0.142 ** 1
−0.073
Board 0.034 * 0.080 ** 0.022 −0.024 −0.001 1
**
−0.619
Out 0.002 * 0.006 −0.005 0.058 * −0.001 0.019 1
**
−0.050 −0.085 −0.078 −0.306
Num 0.067 ** −0.014 0.016 0.441 ** 1
* ** ** **
−0.044 −0.096
Size 0.008 * 0.264** 0.059 * −0.032 0.138 ** −0.035 0.110 ** 1
* **
ROE 0.126 ** 0.034 0.04 0.028 0.075 ** 0.108 ** 0.073 ** −0.024 0.086 ** −0.004 1
−0.050 −0.204 −0.051 −0.180
Alr −0.192 ** 0.088** 0.012 −0.035 0.041 −0.025 0.322 ** 1
* ** * **
Growth 0.165 ** 0.019 0.087 ** 0.007 0.057 * 0.081 ** 0.053 * −0.016 0.113 ** 0.160 ** 0.178 ** −0.009 1
Note: ***, **, and * represent significance at the 1%, 5%, and 10% levels, respectively.

4.2. Same-Group Effect of Corporate ESG Disclosure

As presented in Table 4, Market1i,t−1 and Market2i,t−1 show a significant positive
correlation at the 1% level. This suggests that companies tend to imitate the market average
of ESG disclosure levels of other companies in the same region and industry in the previous
period, supporting Hypotheses 1A and 1B. The coefficients of ESGi,t−1 in both models are
significantly positive, indicating that the ESG disclosure level in the previous period has an
impact on the current ESG disclosure level. Thus, we conclude that there is a same-group
effect in ESG disclosure. Regarding the control variables, Alr and Size exhibit significant
negative correlations, suggesting that the size and leverage of the company have an adverse
impact on the ESG disclosure level. Conversely, Crio and Growth have significant positive
coefficients, indicating that the concentration of ownership and the company’s growth
promote the level of ESG disclosure.

4.3. The Moderating Effect of Top Management’s Social Network on the Same-Group Effect of
Corporate ESG Disclosure
As indicated in Table 5, in Models (3) and (4), the standardized coefficient of Net is
negative, suggesting a negative relationship between the richness of top management’s
social network and the level of corporate ESG disclosure. This implies that within the same
region or industry, a greater extent of top management’s social network is associated with
a lower level of ESG disclosure. Neti,t × Market1i,t−1 is significantly positive at the 1%
level, indicating that the same-group effect of ESG disclosure is positively moderated by
the richness of top management’s social network. In other words, as the social network
of top management becomes more extensive, the same-group effect of ESG disclosure is
strengthened. This provides support for Hypothesis 2. Regarding the control variables, the
standardized coefficients of Crio and Roe consistently show significant and positive effects
in both models. This suggests that within the same region or industry, the concentration of
ownership and profitability significantly enhance the level of ESG disclosure. Conversely,
the standardized coefficient of Size consistently shows a significant and negative effect in
both models, indicating that the firm’s size reduces the level of ESG disclosure.
Sustainability 2023, 15, 11989 9 of 14

Table 4. Regression Results of Same-group Effect of Corporate ESG Disclosure.

ESG Disclosure Level

Model 1 Model 2
ESGi,t−1 0.796 *** 0.734
Market1i,t−1 0.042 ***
Market2i,t−1 0.165 ***
Alr −0.039 ** −0.021 *
Crio 0.027 ** 0.034 **
Dual −0.013 −0.019
Board 0.004 0.002
Out −0.025 −0.026
Num 0.004 0.003
Size −0.037 ** −0.031 **
Roe 0.001 −0.002
Growth 0.031 ** 0.029 **
Adjusted R2 0.668 0.688
F-value 282.669 309.867
Sample Size 1540 1540
Note: ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

Table 5. Test of Regional Effects.

ESG Disclosure Level

Model 3 Model 4
ESGi,t−1 0.428 *** 0.412 ***
Net −2.615 *** −2.529 ***
Neti,t × Market1i,t−1 2.652 ***
Neti,t × Market2i,t−1 2.566 ***
Market1i,t−1 0.019 *
Market2i,t−1 0.075 ***
Alr −0.012 −0.004
Crio 0.022 ** 0.025 **
Dual −0.014 −0.017
Board −0.015 −0.016
Out −0.016 −0.017
Num 0.015 0.014
Size −0.025 ** −0.023 **
ROE 0.031 *** 0.029 ***
Growth 0.01 0.01
Adjusted R2 0.827 0.831
F-value 565.475 581.477
Sample Size 1540 1540
Note: ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

4.4. Robustness Test

In order to ensure the reliability of the results of this study, five types of robustness
tests were conducted: First, the per capita GDP was added as a control variable to control
for macroeconomic conditions; second, the lagged effect of executive social networks was
considered; third, the bootstrapping regression method was used to overcome the issue of
small sample size; and fourth, a panel model with bidirectional fixed effects was employed
based on the data characteristics and model applicability.
(1) Divided into several groups and regression
To further determine whether the social networks of the executive team have an impact
on the homophily effect of ESG disclosure when imitating companies expand their regional
presence, we divide the regions of companies into eastern, central, and western regions
according to the latest industry classification issued by the China Securities Regulatory
Sustainability 2023, 15, 11989 10 of 14

Commission. We treat each region as a separate sample to further test the conclusions
mentioned above. Models (5) and (6) are constructed as follows:

SGi,t = β0 + β1 market3i,t−1 + β2 ESGi,t−1 + ∑ βj Controlsj,i,t + εi,t (5)

ESGi,t = β0 × β1 market3i,t−1 + β2 Neti,t + β3 Neti,t × Market3i,t−1 + β4 ESGi,t−1 + ∑ βj Controlsj,i,t + εi,t (6)

Here, Market3i,t−1 represents the average level of ESG disclosure of other companies
in the same region as company i in the previous period t − 1.
As shown in Table 6, the variables Market3i,t−1 for all three regions are positively
significant, indicating that companies imitate the average level of ESG disclosure of other
companies in the same region in their ESG disclosure. ESGi,t−1 is significant, indicating
that ESG disclosure is influenced by the previous period. In Table 7, the coefficients of Net
and Neti,t × Market3i,t−1 are significant at a 1% level, indicating a positive and significant
impact of the executive team’s social networks on ESG disclosure in large-scale regions
such as the eastern, central, and western regions, consistent with the previous findings.

Table 6. Regression Results of Same-group Effect of ESG Disclosure by Region.

ESG Disclosure Level

Eastern Region Central Region Western Region
Market3t−1 0.063 *** 0.112 ** 0.299 ***
ESGi,t−1 0.786 *** 0.675 *** 0.645 ***
Alr −0.027 −0.066 −0.01
Crio 0.02 0.106 ** 0.079
Dual −0.005 −0.059 −0.143 **
Board 0.016 0.005 −0.081
Out −0.024 0.039 −0.016
Num 0 −0.007 −0.03
Size −0.031 * −0.125 ** 0.052
ROE −0.007 0.037 0.048
Growth 0.028 0.093 ** −0.061
Adjusted R2 0.659 0.654 0.782
F-value 224.162 31.972 29.328
Sample Size 1271 181 88
Note: ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

Table 7. Test of Moderating Effects.

ESG Disclosure Level

Eastern Region Central Region Western Region
Market3t−1 0.023 * 0.018 0.205 ***
Net −2.708 *** −3.284 *** −1.468 ***
Neti,t × Market3t−1 2.737 *** 3.365 *** 1.565 ***
ESGi,t−1 0.414 *** 0.346 *** 0.417 ***
Alr −0.005 −0.016 0.009
Crio 0.014 0.056 0.03
Dual −0.006 −0.042 −0.134 **
Board −0.021 −0.009 −0.022
Out −0.023 0.014 0.014
Num 0.007 0.045 0.019
Size −0.028 ** −0.018 0.061
ROE 0.002 0.06 * 0.096 *
Growth 0.005 0.025 −0.008
Adjusted R2 0.826 0.818 0.854
F-value 465.868 63.373 40.173
Sample Size 1271 181 88
Note: ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.
Sustainability 2023, 15, 11989 11 of 14

The same-group effect of executive social networks on corporate ESG may be driven
by similar macroeconomic forces that encourage these companies to adopt ESG disclosure
practices. To mitigate the potential influence of unobservable firm and CEO characteristics,
we employ a fixed-effects model to control for firm-level fixed effects and time-fixed
effects. We then re-estimate the model, and the results of our study provide support for the
aforementioned hypothesis.
(2) Control of macroeconomic environment
In order to overcome the potential impact of the macroeconomic environment on the
ESG disclosure of firms, we introduced per capita GDP as a control variable to address
this concern. The regression results, shown in Table 8 Column (1), demonstrate that even
after controlling for macroeconomic conditions, executive social networks still significantly
contribute to the homophily effect in ESG disclosure, supporting the findings of this study.

Table 8. Robustness Test.

Variables (1) (2) (3)

Net −2.507 *** −2.589 *** −2.589 ***
Control variables Yes Yes Yes
Constant 1.773 ** 1.771 ** 2.225 **
FE of company Yes Yes Yes
FE of year Yes Yes Yes
R2 0.546 0.527 0.524
Sample of size 1271 1271 1271
Note: *** and ** indicate significance at the 1% and 5 levels, respectively.

(3) Bootstrapping regression

Considering the relatively small sample size of panel data consisting of 385 firms over
a period of 4 years, we employed the bootstrap method to obtain more robust regression
results. Therefore, we conducted 1000 iterations of bootstrap sampling and performed
regression analysis again. The results, presented in Table 8 Column (4), indicate that
after 1000 iterations of bootstrap sampling, the regression coefficients and significance of
executive social networks remained unchanged compared to the base regression, further
confirming the robustness of our findings.
(4) Alternative regression methods
In addition to the base regression, we also employed a panel model with bidirectional
fixed effects for further analysis. The results, shown in Table 7 Column (4), consistently
aligned with the base regression, demonstrating the robustness of our findings after the
alternative regression method was applied.

5. Conclusions and Implications

5.1. Research Conclusions
This study examines the impact of the social networks of top management teams on
the homophily effect of ESG disclosure in China’s privately-owned companies listed on the
Growth Enterprise Market from 2018 to 2021. The conclusions are as follows: The current
level of ESG disclosure in a company is positively correlated with the average level of ESG
disclosure among other companies in the same region and industry in the previous period,
indicating the presence of a homophily effect in ESG disclosure. Despite the negative
influence of top management team social networks on ESG disclosure behavior, they have
a positive moderating effect on the homophily effect of ESG disclosure. This suggests that
in companies with rich top management team social networks, the homophily effect of ESG
disclosure will be strengthened, while in companies with limited top management team
social networks, the homophily effect of ESG disclosure will be weakened.
Sustainability 2023, 15, 11989 12 of 14

5.2. Research Implications

In summary, the social networks of top management teams in privately-owned listed
companies have a positive impact on the homophily effect of ESG disclosure, indicating
that companies with more extensive social networks among their top management teams
exhibit a higher homophily effect in ESG disclosure. This study not only expands the
literature on the influence of social networks on the homophily effect of ESG disclosure but
also provides suggestions for companies and decision-makers for their future development.
From the company’s perspective, building and enriching social networks can enhance
ESG disclosure levels, gain more returns, and increase corporate value. From the decision-
makers’ perspective, strengthening social network development not only improves a
company’s competitiveness in a complex environment but also contributes positively to the
rapid development of the overall socio-economic system. Therefore, for privately-owned
enterprises, it is important to expand the social networks of top management teams, acquire
external information, conduct proper analysis, make informed decisions, and promote
high-level corporate development. The findings of this study have implications for the
development of relevant theories and the formulation and implementation of policies.

5.3. Research Limitations

Due to constraints such as data availability, it is necessary to further validate the
research findings of this study when extrapolating them from private enterprises to the
overall context. The use of more detailed data would be required for this purpose. Addi-
tionally, exploring the specific impacts of regional and industry-specific public policies and
providing more detailed policy recommendations for different regions and industries are
all directions that warrant further investigation.

Author Contributions: Conceptualization, J.Z. and Z.L.; methodology, J.Z.; software, J.Z.; validation,
J.Z. and Z.L.; formal analysis, J.Z.; investigation, J.Z.; resources, J.Z.; data curation, J.Z.; writing—
original draft preparation, J.Z.; writing—review and editing, J.Z.; visualization, J.Z.; supervision,
Z.L.; project administration, J.Z. All authors have read and agreed to the published version of
the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Informed consent was obtained from all subjects involved in the study.
Data Availability Statement: The data presented in this study are available in a public dataset.
Conflicts of Interest: The authors declare no conflict of interest.

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