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Environmental science and pollution research international
Jun, 2023;30 (29): 73231-73253.

Understanding the nexus between environmental, social, and governance (ESG) and financial performance: evidence from Chinese-listed companies.

Rong Zhou, Jundong Hou, Fei Ding
Author Information
  1. Rong Zhou: School of Economics and Management, China University of Geosciences, Wuhan, 430074, China.
  2. Jundong Hou: School of Economics and Management, China University of Geosciences, Wuhan, 430074, China. houjundong@cug.edu.cn.
  3. Fei Ding: Research Center for Rural Economy, Ministry of Agriculture and Rural Affairs, Beijing, 100810, China.
PMID: 37184789 DOI: 10.1007/s11356-023-27449-5

Abstract

Before discussing how to balance and decide on environmental, social, and corporate governance (ESG) and traditional revenue enhancement projects, it is crucial to clarify the relationship between corporate financial performance (CFP) and ESG. However, little attention has been paid to the nexus of ESG and CFP. This paper attempts firstly to investigate the bidirectional causality of ESG and CFP, followed by the micro-foundations, and finally, the moderating effect of intrinsic factors. A GMM-PVAR method was used to examine the research hypotheses, which can effectively deal with endogenous problems that have been ignored by traditional literature. The findings of this research demonstrate that CFP promoted ESG growth, but ESG did not boost CFP. This asymmetric causality was because CFP had a supportive effect on the environment and society pillars, while the social pillar cannot promote CFP, and the environment pillar negatively affects CFP. The relationship between ESG and CFP was moderated by total quality management, environmental sensitivity, and the pay gap. Furtherly, a panel threshold model was constructed to access the threshold effects of ESG on CFP, showing an inverted U-shape. Based on these findings, the theoretical implications, managerial prescriptions, and limitations are also discussed.

Keywords

Bidirectional relationship Corporate financial performance Environmental, social, and corporate governance GMM-PVAR Granger causality Threshold effects

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Grants

  1. 72274185/National Natural Science Foundation of China
  2. 71874163/National Natural Science Foundation of China

MeSH Term

Conservation of Natural Resources
Public Policy
Environmental Policy
Industry
China
Journal Article

Word Cloud

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