Environmental Dimension in ESG: Impact on Corporate Governance Risk

Abstract

Using data of Chinese Α-share non-financial listed firms from 2018 to 2023, this paper empirically examines how ESG performance and disclosure quality affect corporate governance risk. It takes corporate irregularities and analyst forecast errors as core proxies for governance risk, and employs Logit and OLS regressions to test the moderating role of firm internationalization. The results indicate that overall ESG performance, especially the environmental pillar, significantly curbs corporate governance risk. High-quality, transparent ESG disclosure strengthens this risk-suppressing effect and mitigates information asymmetry arising from ESG controversies and adverse events. Firms' cross-border business expansion also notably amplifies the risk-reduction effect of sound ESG performance. These conclusions offer practical empirical references for corporate governance, regulatory design and investor decision-making in capital markets.