The impact of environmental, social, and governance on corporate financial performance: Empirical evidence based on Chinese a-share listed companies

Guo  Yiheng; Aza Azlina Md  Kassim; Xu  Heng; Zhang  Kai

doi:10.33094/ijaefa.v18i1.1336

Authors

Guo Yiheng Graduate School of Management, Postgraduate Centre, Management and Science University,40100, Selangor, Malaysia and School of Finance and Accounting, Henan University of Animal Husbandry and Economy, 450000, Zhengzhou, Henan, China.
Aza Azlina Md Kassim Graduate School of Management, Postgraduate Centre, Management and Science University,40100, Selangor, Malaysia.
Xu Heng School of Management, Henan University of Technology, 450001，Zhengzhou, Henan, China.
Zhang Kai Graduate School of Management, Postgraduate Centre, Management and Science University,40100, Selangor, Malaysia. https://orcid.org/0009-0009-5026-6660

DOI:

https://doi.org/10.33094/ijaefa.v18i1.1336

Keywords:

Corporate financial performance, Environmental, ESG, Governance, Social.

Abstract

This study aims to delve into the influence of ESG performance on the financial outcomes of companies listed on China's A-share market, emphasizing the interplay of ESG's three critical dimensions: environmental, social, and governance performance. Utilizing ESG data from A-share listed companies in China spanning from 2013 to 2022, regression analysis was executed in STATA 17.0. Factors like company size, leverage, growth, age, board size, and ownership concentration were integrated as control variables. The results underscored a positive association between both holistic ESG performance and its individual dimensions (environmental, social, and governance performance) and financial outcomes. Notably, non-state-owned enterprises exhibited a more pronounced positive relationship between ESG performance and financial results than their state-owned counterparts. Drawing from these insights, it's advocated that companies amplify their efforts towards ESG performance enhancement. It further accentuates the need for regulatory bodies to formulate pertinent policies and amplify oversight. Additionally, investors are advised to incorporate ESG performance metrics into their investment decisions, promising not only improved financial standing for corporations but also fostering sustainability and comprehensive growth in the social, environmental, and economic domains.