REGULATORY PRESSURE AND PROACTIVE ESG COMPLIANCE MANAGEMENT IN CHINESE LISTED FIRMS: THE ROLES OF SANCTION CERTAINTY AND LAW-COMPLIANT LEADERSHIP

Abstract

As China’s sustainability disclosure framework progressively moves from voluntary reporting towards mandatory requirements, understanding how firms translate external regulatory obligations into internal compliance practices has become increasingly important. Against this backdrop, the present study examines the relationship between regulatory pressure and proactive compliance management among Chinese listed manufacturing companies, considering perceived sanction certainty as a mediating mechanism and law-compliant leadership behaviour as a moderating influence. Integrating institutional theory, deterrence theory, and social learning theory, the research develops and empirically evaluates a moderated mediation model. The study adopts a quantitative, cross-sectional research design to examine proactive ESG compliance management among Chinese listed manufacturing firms, focusing on regulatory pressure, perceived sanction certainty, and law-compliant leadership behaviour.The proposed relationships were assessed using partial least squares structural equation modelling (PLS-SEM) through SmartPLS. The empirical results demonstrate that regulatory pressure positively influences both perceived sanction certainty (β = .450, p < .001) and proactive compliance management (β = .276, p < .001). Perceived sanction certainly also exhibits a significant positive association with proactive compliance management (β = .458, p < .001), while partially transmitting the influence of regulatory pressure on compliance practices (indirect β = .206, p < .001). Furthermore, law-compliant leadership behaviour directly enhances proactive compliance management (β = .268, p < .001) and amplifies the positive relationship between perceived sanction certainty and proactive compliance management (interaction β = .158, p < .001). The explanatory capacity of the model accounts for 20.3% of the variance in perceived sanction certainty and 58.4% of the variance in proactive compliance management. These findings advance the literature on mandatory ESG disclosure by clarifying the behavioural mechanism through which external regulatory demands foster proactive organisational compliance and demonstrating how leadership conduct strengthens this process.