Does ESG always improve corporate performance? Evidence from firm life cycle perspective
In this study, drawing on firm life cycle theory, we focus on the corporate performance of Environmental, Social, and Governance (ESG) engagement via financial stress and consider the moderate effect of transparency, financial slack, and environmental uncertainty. The industry-year fixed effects pan...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Frontiers Media S.A.
2023-01-01
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| Series: | Frontiers in Environmental Science |
| Subjects: | |
| Online Access: | https://www.frontiersin.org/articles/10.3389/fenvs.2023.1105077/full |
| _version_ | 1811175389146382336 |
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| author | Shang Gao Fanchen Meng Fanchen Meng Wenshuai Wang Wenxin Chen |
| author_facet | Shang Gao Fanchen Meng Fanchen Meng Wenshuai Wang Wenxin Chen |
| author_sort | Shang Gao |
| collection | DOAJ |
| description | In this study, drawing on firm life cycle theory, we focus on the corporate performance of Environmental, Social, and Governance (ESG) engagement via financial stress and consider the moderate effect of transparency, financial slack, and environmental uncertainty. The industry-year fixed effects panel regression analysis is executed based on the data including 11,742 firm-year observations for 1,486 Chinese A-share listed companies from 2010 to 2020. The results show that ESG performance can significantly improve corporate performance at all life cycle stages, especially when the corporate is in the growth stage. Moreover, the mechanism analysis shows that the financial risk mediates the relation between ESG performance and corporate performance for the corporates in the growth and maturity stages. The association between ESG and corporate performance is more pronounced when corporate information disclosure quality is high. Moreover, financial slack moderates and undermine the association between ESG and corporate performance in the maturity stages. Similarly, for the maturity and decline stages of corporate, environmental uncertainty moderates and undermines the association between ESG and corporate performance. Besides offering scientific evidence for the role of ESG ratings in relieving financial pressure and promoting corporate performance in growth and maturity stages, the results can also inform the regulators and/or investors of the benefit of engaging in corporates sustainability transition, which has implications for both the success of the regulatory regime and the advancement of long-term investment philosophy. |
| first_indexed | 2024-04-10T19:35:20Z |
| format | Article |
| id | doaj.art-38828e7642824eb3a54782ccf9636f5c |
| institution | Directory Open Access Journal |
| issn | 2296-665X |
| language | English |
| last_indexed | 2024-04-10T19:35:20Z |
| publishDate | 2023-01-01 |
| publisher | Frontiers Media S.A. |
| record_format | Article |
| series | Frontiers in Environmental Science |
| spelling | doaj.art-38828e7642824eb3a54782ccf9636f5c2023-01-30T06:17:40ZengFrontiers Media S.A.Frontiers in Environmental Science2296-665X2023-01-011110.3389/fenvs.2023.11050771105077Does ESG always improve corporate performance? Evidence from firm life cycle perspectiveShang Gao0Fanchen Meng1Fanchen Meng2Wenshuai Wang3Wenxin Chen4Beijing Institute of Technology, Beijing, ChinaSchool of Management and Economics, Beijing Institute of Technology, Beijing, ChinaShenzhen MSU-BIT University, Shenzhen, ChinaBeijing Institute of Technology, Beijing, ChinaESSEC Business School, Cergy, Île-de-France, FranceIn this study, drawing on firm life cycle theory, we focus on the corporate performance of Environmental, Social, and Governance (ESG) engagement via financial stress and consider the moderate effect of transparency, financial slack, and environmental uncertainty. The industry-year fixed effects panel regression analysis is executed based on the data including 11,742 firm-year observations for 1,486 Chinese A-share listed companies from 2010 to 2020. The results show that ESG performance can significantly improve corporate performance at all life cycle stages, especially when the corporate is in the growth stage. Moreover, the mechanism analysis shows that the financial risk mediates the relation between ESG performance and corporate performance for the corporates in the growth and maturity stages. The association between ESG and corporate performance is more pronounced when corporate information disclosure quality is high. Moreover, financial slack moderates and undermine the association between ESG and corporate performance in the maturity stages. Similarly, for the maturity and decline stages of corporate, environmental uncertainty moderates and undermines the association between ESG and corporate performance. Besides offering scientific evidence for the role of ESG ratings in relieving financial pressure and promoting corporate performance in growth and maturity stages, the results can also inform the regulators and/or investors of the benefit of engaging in corporates sustainability transition, which has implications for both the success of the regulatory regime and the advancement of long-term investment philosophy.https://www.frontiersin.org/articles/10.3389/fenvs.2023.1105077/fullESGCSRfirm life cyclefinancial riskcorporate performance |
| spellingShingle | Shang Gao Fanchen Meng Fanchen Meng Wenshuai Wang Wenxin Chen Does ESG always improve corporate performance? Evidence from firm life cycle perspective Frontiers in Environmental Science ESG CSR firm life cycle financial risk corporate performance |
| title | Does ESG always improve corporate performance? Evidence from firm life cycle perspective |
| title_full | Does ESG always improve corporate performance? Evidence from firm life cycle perspective |
| title_fullStr | Does ESG always improve corporate performance? Evidence from firm life cycle perspective |
| title_full_unstemmed | Does ESG always improve corporate performance? Evidence from firm life cycle perspective |
| title_short | Does ESG always improve corporate performance? Evidence from firm life cycle perspective |
| title_sort | does esg always improve corporate performance evidence from firm life cycle perspective |
| topic | ESG CSR firm life cycle financial risk corporate performance |
| url | https://www.frontiersin.org/articles/10.3389/fenvs.2023.1105077/full |
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