Abstract: ESG is an important tool for empowering sustainable corporate development, and different characteristics of subgroups within the board of directors can have a significant impact on corporate strategic decisions, which in turn affects corporate ESG performance. However, existing studies have not yet revealed the mechanism by which the characteristics of subgroups within the board of directors affect corporate ESG performance. Based on the group fracture zone theory, this paper focuses on the impact of board fracture zones on corporate ESG performance and its mechanism of action by utilizing the data of Shanghai and Shenzhen A-share listed companies from 2010 to 2023. The study finds that board fracture zones significantly improve corporate ESG performance. Board fracture zones affect corporate ESG performance by curbing management’s short-sighted behavior and improving ESG investment motivation and easing financing constraints to improve ESG investment capacity. It is further found that the complexity of a firm’s internal environment and market focus inhibit the contribution of board fracture zones to the firm’s ESG performance. In addition, the contribution of board fracture zones to firms’ ESG performance mainly stems from fracture zones formed by deep characteristics, and is more pronounced among firms with higher equity checks and balances, firms from eastern regions, and non-state-owned firms. This study enriches and expands the research on the antecedents of corporate ESG performance from the perspective of internal corporate governance. It provides important insights for regulatory authorities to formulate differentiated policies and for companies to optimize board governance structures to enhance ESG performance in practice.

Key words: board fracture zone, enterprise ESG performance, short sightedness of management, financing constraints