Does Speed of Pro-Market Reforms Stifle Firm ESG Engagement?

While the influence of market-supporting institutions on firm behavior is well established in the literature, our understanding of institutional change dynamics—particularly the speed of pro-market reforms—on corporate nonmarket strategies, such as ESG (Environmental, Social, and Governance) engagement, remains limited. To address this research gap, we develop a theoretical framework that investigates whether, how, and under what conditions the speed of pro-market reforms creates constraints for firms engaging in ESG activities. Employing a dynamic institution-based view and analyzing a panel data of Chinese publicly listed firms, we find that firms operating in regions undergoing rapid pro-market reforms participate less actively in ESG initiatives. Critically, CEO characteristics act as buffers: corporate leaders with international experience and/or hometown ties appear to mitigate reform-induced uncertainty, enabling more resilient ESG navigation during institutional transitions. These findings advance the dynamic institutional perspective by demonstrating how temporal institutional shifts shape corporate behavior.