Political acuity, ESG atmosphere, and corporate performance --- an empirical study based on the acuity dictionary and annual reports.

The relationship between government and enterprise has attracted extensive attention. Under the increasingly severe requirement of sustainable development, there is still a lack of research on the economic effect of political acuity from the perspective of enterprise's positive party value creation. We built a dictionary of political acuity and demonstrated reliability through machine learning algorithms such as K-Nearest Neighbor (KNN). Then, based on the annual reports of China's listed companies from 2013 to 2020, the relationship between political acuity, ESG atmosphere, and corporate performance is empirically discussed. Examination through the formal institutional perspective of informal institutionalization shows that the positive acuity of the Communist Party of China(CPC) and the democratic parties(DPC) will improve corporate performance, while the negative acuity will have an early warning effect on performance. Furthermore, the stronger ESG atmosphere synergized this relationship. The CPC's negative acuity has supervision effect on non-state-owned companies, and this supervisory effect still exists in the ESG atmosphere. However, whether the moderating effect is considered or not, the positive political acuity of state-owned enterprises doesn't significantly improve performance. We found that the CPC's embedding in corporate governance will lead to both economic and political benefits, and have thresholds. We constructed a political acuity dictionary and introduced text analysis and nonparametric estimation method in this paper, which provided a basis and reference for future research on political acuity at the enterprise level. Our findings also enrich the institutional theory and the embeddedness theory. Meanwhile, our research broadened the boundary of political parties, ESG, and enterprises, the integration of ideological values and formal institutions, and had practical implications for the green transformation of firms and the precise positioning of political party functions. • We build a dictionary of political acuity for the first time. This dictionary provides a new measurement perspective for the study of corporate political sentiment and sustainable development. • From the perspective of positive value creation, we examine the impact path of a company's party acuity, ESG atmosphere, and financial performance. This paper helps to expand the governance boundaries of ideology and formal institutions, political concepts, and corporate behavior. • We explored the accounting consequences of political acuity for different types of firms, and measured the economic and political effects thresholds. • We introduced machine learning, python crawler, text analysis, and nonparametric estimation methods into this paper, which helped to expand the technical approach to corporate governance and green transformation. [ABSTRACT FROM AUTHOR]