Aug 2026· Journal of Risk and Financial Management· Vol 19, pp. 567· 0 citations· 56 references
Abstract
This study examines whether environmental, social, and governance (ESG) performance enhances firm value in China’s A-share market, how this relationship operates, and under what conditions it becomes stronger. Drawing on stakeholder theory, the natural resource-based view, and the dynamic capabilities perspective, this study develops a moderated mediation framework in which green innovation mediates the ESG–firm value relationship and digital transformation strengthen the ESG–green innovation link. Using panel data for 4423 Chinese A-share listed firms comprising 27,254 firm-year observations from 2009 to 2023, the hypotheses are tested using two-way fixed-effects models, mediation and moderated mediation analyses, robustness tests, and instrumental-variable estimation. The results show that overall ESG performance is positively associated with firm value, although its dimensions exhibit heterogeneous effects: environmental performance is negatively associated with firm value, whereas social and governance performance show positive associations. Green innovation partially mediates the ESG–firm value relationship, indicating that ESG creates greater economic value when sustainability commitments are translated into substantive green innovation. Digital transformation further strengthens the indirect effect of ESG performance on firm value through green innovation. Heterogeneity analyses reveal that the value relevance of ESG varies across firm size, ownership type, and industry pollution intensity. The findings suggest that ESG does not create firm value automatically; rather, its economic value depends on firms’ ability to transform sustainability commitments into innovation, with digital transformation enhancing this process. By identifying both the mechanism and the boundary condition of ESG value creation, this study provides new evidence on how and under what conditions ESG contributes to firm value in an emerging market.
This study examines whether environmental, social, and governance performance promotes firm green transformation in China's emerging economy context, and explains how ESG engagement moves beyond symbolic legitimacy toward organizational change. It conceptualizes green transformation as a dual process that combines green innovation with efficiency upgrading, thereby linking external sustainability pressures to firms’ internal innovation capabilities and productivity improvements. By focusing on Chinese A-share listed firms, the study aims to clarify the firm-level mechanisms through which ESG performance affects independently developed green technologies, collaborative green innovation, and total factor productivity, while identifying the organizational conditions that strengthen or weaken these effects.
The study uses an unbalanced panel of Chinese A-share listed firms from 2015 to 2024. Green transformation is measured through independently filed green patents, jointly filed green patents, and total factor productivity estimated using the Levinsohn–Petrin approach. Baseline fixed-effects models are employed to estimate the relationship between ESG performance and green transformation. To address selection bias and dynamic endogeneity, the analysis further applies propensity score matching combined with fixed effects and system GMM estimations. Robustness tests use alternative ESG ratings and alternative green transformation measures. Mechanism and heterogeneity analyses examine internal channels and conditional firm characteristics in greater empirical detail.
The results show that higher ESG performance significantly promotes all three dimensions of firm green transformation: independent green innovation, collaborative green innovation, and productivity upgrading. These findings remain robust across matching-based fixed-effects models, system GMM estimations, alternative ESG ratings, and alternative outcome measures. Mechanism tests reveal that ESG facilitates green transformation by expanding innovation human capital, improving internal control quality, and shaping firms’ financing conditions. Heterogeneity analyses indicate that the positive effect of ESG is stronger among tech-intensive firms and small firms, suggesting that absorptive capacity and marginal legitimacy gains condition the effectiveness of ESG engagement in China’s institutional context.
This study offers value by reframing ESG as an internal transformation capability rather than a disclosure or legitimacy device. It advances ESG research by unpacking three firm-level transmission mechanisms—innovation human capital, internal control quality, and financing conditions—through which ESG supports green innovation and productivity upgrading. It also broadens green transformation measurement by combining independent green patents, joint green patents, and Levinsohn–Petrin total factor productivity. Focusing on Chinese A-share firms, the study provides context-sensitive evidence from an emerging economy and shows that ESG effects vary by technological intensity and firm size, offering implications for differentiated sustainability governance and investment.
Jingjing Lyu, Yixiao Zhu· International Journal of Eme...· 0 citations
This study examines both the linear and nonlinear relationship between overall Environmental, Social, and Governance (ESG) performance and firm market value, while also comparing the effects of the Environmental, Social, and Governance dimensions in publicly listed companies from the European Union. The analysis is based on an unbalanced panel of 1706 non-financial listed firms covering the period 2011–2025. Firm value is primarily measured by Tobin’s Q, with the Price-to-Book ratio and Return on Assets (ROA) used for robustness analysis. The results indicate a significant U-shaped relationship between overall ESG performance and firm value, suggesting that the value-enhancing effects of ESG emerge only after firms achieve sufficiently high sustainability performance. In contrast, the individual Environmental, Social, and Governance dimensions in most cases do not exhibit significantly different effects on firm market value. Additional subsample analyses reveal that the nonlinear relationship is more pronounced among Western European firms and companies with lower greenhouse gas emissions intensity. The findings suggest that investors primarily evaluate firms based on their overall sustainability profile rather than individual ESG dimensions. The study contributes to the ESG literature by providing further evidence of the nonlinear nature of the ESG–firm value relationship and by comparing the explanatory power of aggregated and disaggregated ESG measures within the European Union’s harmonized sustainability reporting environment.
A. Staugaitis, Č. Christauskas· International Journal of Fin...· 0 citations
This study examines the relationship between environmental, social, and governance (ESG) performance and firm value in the global energy sector, with a focus on the moderating effects of national culture and green innovation. It analyzes 1960 firm‐year observations from publicly traded energy companies in 35 countries from 2014 to 2023. Results show that ESG performance is positively associated with accounting‐based performance, while its impact on market valuation is limited. National culture plays a significant role: individualism enhances the financial benefits of ESG, whereas power distance and uncertainty avoidance reduce them. Green innovation improves operational performance but does not strengthen the ESG–firm value link, likely because of the short‐term costs of implementation and adjustment. The findings underscore the critical role of institutional context and organizational capabilities in driving value through sustainability initiatives in the energy sector. These results hold consistently across ESG measures, subsample analyses, and endogeneity tests.
Atar Derj, Adil Bami, Slimane Ed-dafali et al.· Corporate Social Responsibil...· 0 citations
This study investigates the relationship between Environmental, Social, and Governance (ESG) performance and firm performance among 338 firms (747 firm-year observations) listed on Bursa Malaysia from 2018 to 2023. Using a fixed-effects panel regression approach, the analysis evaluates the direct impact of ESG performance on financial performance, measured by return on equity (ROE), and market performance, measured by Tobin’s Q (TQ). The results show that ESG performance alone does not significantly enhance firm outcomes, with ESG scores displaying a significant negative association with market valuation, suggesting that the high costs and complexities of implementing ESG initiatives may outweigh short-term benefits in investor assessments. Firm-specific characteristics are found to moderate the ESG - performance relationship. Larger firms show weaker market outcomes when ESG engagement is high, reflecting delayed returns and greater implementation challenges. In contrast, external validation through inclusion in the FTSE4Good Bursa Malaysia Index (F4GBM) positively moderates the ESG-TQ relationship, underscoring the importance of recognition by sustainability indices in strengthening market confidence whereas Shariah compliance does not exhibit significant moderating effects. The findings highlight the multifaceted and context-dependent nature of ESG outcomes in Malaysia, offering valuable implications for firms, investors, and regulators seeking to align sustainability with financial and market success.
M. Tareq, Chong He Ong, Asyraf Abdul Halim· International Journal of Ban...· 0 citations
This study examines the effect of Environmental, Social, and Governance (ESG) performance on firm value in the banking sector and investigates whether banking-specific ESG context moderates this relationship. Using panel data from 133 bank-year observations covering 26 banks during 2019–2024, the study employs panel regression analysis based on the Common Effect Model, Fixed Effect Model, and Random Effects Model. Model selection is performed using the Chow, Breusch–Pagan Lagrange Multiplier, and Hausman tests. ESG performance is measured using aggregate ESG performance and its environmental, social, and governance dimensions, while firm value is measured using Tobin’s Q. The results show that overall ESG performance has a negative but statistically insignificant effect on firm value. Similarly, environmental, social, and governance performance individually have no statistically significant effects on firm value. The moderation analysis further indicates that banking-specific ESG context does not significantly moderate the relationship between ESG performance and firm value, either at the aggregate level or across individual ESG dimensions. These findings suggest that ESG implementation alone may not be sufficient to generate immediate market valuation benefits. ESG value creation may depend on strategic integration, credible disclosure, effective governance, risk management, and stakeholder recognition.
Dadang Agus Suryanto· International Journal of Eco...· 0 citations
In view of China's “dual carbon goals” (carbon neutrality and carbon peaking), the mechanisms and boundary conditions that form the basis of the relationship between corporate environmental, social, and governance (ESG) performance and financial performance have not been adequately explored. Using data on Chinese A‐share listed firms from 2010 to 2024, this study investigates the mediating role of green innovation in the association between corporate ESG performance and financial performance. Then, we examine the impact of corporate ESG practices on financial performance at varying levels of financial risk, adding consideration of financial risk. Our empirical results indicate that good ESG performance significantly enhances financial performance; however, this relationship is moderated by the level of financial risk. Our heterogeneity analysis reveals that non–state‐owned enterprises, firms with high‐quality information disclosure, and small firms benefit more from ESG‐driven green innovation. This study clarifies the pathways and boundaries of ESG‐driven value creation, enriches the literature on sustainable finance, and provides empirical guidance for enterprises engaged in a low‐carbon transition.
Huimin Shao, Qing Jin, Jia Zhou et al.· Corporate Social Responsibil...· 0 citations
