The Influence of ESG on Firm Performance: Evidence from Listed Companies in China
Journal: Modern Economics & Management Forum DOI: 10.32629/memf.v5i2.1984
Abstract
The primary objective of this dissertation is to examine the influence of environmental, social, and governance (ESG) factors on the financial performance of a selected group of Chinese companies listed on the stock exchange. The results indicate a negative relationship between a firm's ESG performance and overall performance, suggesting that higher ESG performance is associated with worse firm performance. Furthermore, a considerable negative association exists between company performance and the environmental, social, and governance pillars. Upon further examination, the underlying cause for this outcome could be attributed to the company's allocation of resources towards environmental, social, and governance (ESG) initiatives. This investment incurs additional costs, but it is difficult for this expenditure to pay off in the short term. This situation contributes to a decline in the corporation's overall performance. Hence, corporations must prioritize long-term profitability and redirect their focus from immediate financial benefits to enduring social responsibility and sustainability commitments. Companies can incorporate environmental, social, and governance (ESG) plans into their fundamental business strategy to guarantee that ESG objectives align with their long-term goals. This practice aids in the prevention of supplementary expenses.
Keywords
ESG performance, environmental performance, social performance, governance performance, corporate performance, sustainability development
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[3]Chen, Z. and Xie, G. (2022) ‘ESG disclosure and financial performance: Moderating role of ESG investors’, International Review of Financial Analysis, 83, p. 102291.
[4]Madhani P.M. (2014) ‘Corporate Governance and Disclosure Practices of Firms and Nature of Industry: An Empirical Study from Indian Perspectives’. Rochester, NY.
[5]Malik, F. et al. (2023) ‘Impact of Environmental Disclosure on Firm Performance: The Mediating Role of Green Innovation: Impacto de la divulgación de información medioambiental en el rendimiento de las empresas: El papel mediador de la innovación verde’, Revista de Contabilidad - Spanish Accounting Review, 26(1), pp. 14–26.
[6]Paolone, F. et al. (2021) ‘How do ESG pillars impact firms’ marketing performance? A configurational analysis in the pharmaceutical sector’, Journal of Business & Industrial Marketing, 37(8), pp. 1594–1606.
[7]Pettersson, E. and Travergård, A. (2023) Covid-19, Sustainability and Financial Performance : Investigating the effect Covid-19 had on the relationship between ESG and Tobin's Q.
[8]Rahman, H.U., Zahid, M. and Al-Faryan, M.A.S. (2023) ‘ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment’, Journal of Cleaner Production, 404, p. 136859.
[9]Tobin, J. and Brainard, W.C. (1976) Asset Markets and the Cost of Capital. Cowles Foundation Discussion Paper 427. Cowles Foundation for Research in Economics, Yale University.
[10]Wang, Z., Sun, Z. and Teo, B.S.-X. (2023) ‘Literature review on the impact of corporate ESG performance on corporate value’, Journal of Innovation and Development, 2(2), pp. 1–4.
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