The Relationship Between Environmental, Social and Governance (ESG) Disclosures and Firm Performance
Abstract
This study investigates the relationship between Environmental, Social, and Governance (ESG) disclosures and firm performance in China, focusing on the interconnectedness of ESG aspects and their collective impact on financial outcomes. Recognizing the increasing importance of ESG reporting in the global investment landscape, this research delves into how Chinese firms' ESG practices influence their market performance. Utilizing data from Chinese A-share listed companies from 2010 to 2021, the study employs a judgmental sampling of the top 258 stocks by market capitalization. The research methodology includes a comprehensive ESG scoring framework, linear regression models, and trend analysis using SPSS and advanced Excel tools. The findings aim to provide insights into the significance of ESG disclosures in China, a market where sustainability reporting is gaining momentum but still faces unique challenges and skepticism. The study contributes to the broader understanding of ESG's role in firm valuation and offers practical implications for corporate decision-makers in China, emphasizing the need for transparent and comprehensive ESG reporting to attract investment and enhance long-term firm value.
References
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Peiris, D., & Evans, J. (2010), "The Relationship Between Environmental Social Governance Factors and U.S. Stock Performance", Journal of Investing, Vol. 19, No. 3, pp. 104-114.
Pu, G. (2023). A non-linear assessment of ESG and firm performance relationship: evidence from China. Economic Research-Ekonomska Istraživanja, 36(1), 2113336.
Rezaee, Z. (2016). Business sustainability research: A theoretical and integrated perspective. Journal of Accounting Literature, 36, 48–64. https://doi.org/10.1016/j.acclit.2016. 05.003
Sassen, R., Hinze, A.-K., & Hardeck, I. (2016). Impact of ESG factors on firm risk in Europe. Journal of Business Economics, 86(8), 867–904. https://doi.org/10.1007/s11573-016-0819-3
Siew, R. Y. J., Balatbat, M. C. A., & Carmichael, D. G. (2013). The relationship between sustainability practices and financial performance of construction companies. Smart and Sustainable Built Environment, 2(1), 6-27.
Tulcanaza-Prieto, A. B., & Lee, Y. (2022). Real earnings management, firm value, and corporate governance: Evidence from the Korean market. International Journal of Financial Studies, 10(1), 19. https://doi.org/ 10.3390/ijfs10010019
Umlas, E. (2008). The Global Expansion of SRI: Facing Challenges, Meeting Potential. Development and Change, 39(6), 1019-1036.
UNEPFI, and WBCSD. (2010). "Translating ESG into Sustainable business value : Key insights for companies and investors". Switzerland: United Nations Environment Programme Finance Initiative and World Business Council for Sustainable Development, pp. 33-40
Wasiuzzaman, S., Ibrahim, S. A., & Kawi, F. (2022). Environmental, social and governance (ESG) disclosure and firm performance: Does national culture matter? Meditari Accountancy Research, ahead-of-print(ahead-of-print). https://doi.org/10.1108/ MEDAR-06-2021-1356.
Al Amosh, H., Khatib, S. F. A., & Ananzeh, H. (2022). Environmental, social and governance impact on fnancial performance: Evidence from the Levant countries. Corporate Governance: The International Journal of Business in Society, ahead-of-print (ahead-of-print). https://doi.org/10.1108/ CG-03-2022-0105
Allianz. (2019). How environmental, social, and governance issues impact consumers and investors. New York, USA: Allianz Life Company. https://www.allianzlife.com/-/media/fles/allianz/pdfs/newsr oom/fact-sheet-esg.pdf
Beurden, P. v., and Gossling, T. (2008), "The Worth of Values – A Literature Review on the Relation Between Corporate Social and Financial Performance" Journal of Business Ethics, Vol. 82, No. 2, pp. 407–424.
Collin, S. (2009), "The Value of Environmental, Social and Governance Factors for Foundation Investments" (pp. 1-20). London: EIRIS Foundation.
Crifo, P., & Forget, V. D. (2013), "Think Global, Invest Responsible: Why the Private Equity Industry Goes Green", Journal of Business Ethics, Vol. 116, No. 1, pp. 21-48.
D'Amato, A. (2021). Does intellectual capital impact a firm's capital structure? Exploring the role of firm risk and profitability. Managerial Finance, 47(9), 1337–1356. https://doi.org/10.1108/ MF-02-2020-0089
Dalwai, T., Mohammadi, S. S., & Al Siyabi, K. (2018). An empirical analysis of intellectual capital and firm performance of Oman's fnancial sector companies. In 3rd International Conference on Banking and Finance Perspectives (ICBFP). Famagusta.
Demise, N. (2006). OECD principles of corporate governance. In Corporate Governance in Japan (pp. 109–117). Springer. https://doi.org/10.1007/978-4-431-30920-8_10
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10. 1287/mnsc.2014.1984
Elsayed, K., & Paton, D. (2005). The impact of environmental performance on firm performance: Static and dynamic panel data evidence. Structural Change and Economic Dynamics, 16(3), 395–412. https://doi.org/10.1016/j.strueco.2004.04.004
Farooq, O. (2015), "Financial Centers And The Relationship Between ESG Disclosure And Firm Performance: Evidence From An Emerging Market", The Journal of Applied Business Research, Vol. 31, No. 4, pp. 1239-1244.
Fixler, T., Paradi, J. C., & Yang, X. (2014). A data envelopment analysis approach for measuring the efficiency of Canadian acute care hospitals. Health Services Management Research, 27(3-4), 57–69. https://doi.org/10.1177/0951484815601876
Habib, A. M. (2022). Does the efciency of working capital management and environmental, social, and governance performance afect a firm's value? Evidence from the United States. Financial Markets, Institutions and Risks, 6(3), 18–25. https://doi.org/10.21272/ fmir.6(3).18-25.2022
Habib, A. M., & Mourad, N. (2023). The Influence of Environmental, Social, and Governance (ESG) Practices on US Firms' Performance: Evidence from the Coronavirus Crisis. Journal of the Knowledge Economy, 1-22.
Malik, M. (2015). Value-enhancing capabilities of CSR: A brief review of contemporary literature. Journal of Business Ethics, 127(2), 419–438. https://doi.org/10.1007/s 10551-014-2051-9
Mourad, N., Habib, A. M., & Tharwat, A. (2021). Appraising healthcare systems' efciency in facing COVID-19 through data envelopment analysis. Decision Science Letters, 10(3), 301–310. https://doi. org/10.5267/j.dsl.2021.2.007
Nguyen, D. T., Hoang, T. G., & Tran, H. G. (2022). Help or hurt? The impact of ESG on firm performance in S&P 500 non-fnancial firms. Australasian Accounting, Business and Finance Journal, 16(2), 91–102. https://doi.org/10.14453/aabf.v16i2.7
Nicholson, G., Kiel, G., & Kiel-Chisholm, S. (2011). The contribution of social norms to the global fnancial crisis: A systemic actor focused model and proposal for regulatory change. Corporate Governance: An International Review, 19(5), 471–488. https://doi.org/10.1111/j.1467-8683.2011.00883.x
Peiris, D., & Evans, J. (2010), "The Relationship Between Environmental Social Governance Factors and U.S. Stock Performance", Journal of Investing, Vol. 19, No. 3, pp. 104-114.
Pu, G. (2023). A non-linear assessment of ESG and firm performance relationship: evidence from China. Economic Research-Ekonomska Istraživanja, 36(1), 2113336.
Rezaee, Z. (2016). Business sustainability research: A theoretical and integrated perspective. Journal of Accounting Literature, 36, 48–64. https://doi.org/10.1016/j.acclit.2016. 05.003
Sassen, R., Hinze, A.-K., & Hardeck, I. (2016). Impact of ESG factors on firm risk in Europe. Journal of Business Economics, 86(8), 867–904. https://doi.org/10.1007/s11573-016-0819-3
Siew, R. Y. J., Balatbat, M. C. A., & Carmichael, D. G. (2013). The relationship between sustainability practices and financial performance of construction companies. Smart and Sustainable Built Environment, 2(1), 6-27.
Tulcanaza-Prieto, A. B., & Lee, Y. (2022). Real earnings management, firm value, and corporate governance: Evidence from the Korean market. International Journal of Financial Studies, 10(1), 19. https://doi.org/ 10.3390/ijfs10010019
Umlas, E. (2008). The Global Expansion of SRI: Facing Challenges, Meeting Potential. Development and Change, 39(6), 1019-1036.
UNEPFI, and WBCSD. (2010). "Translating ESG into Sustainable business value : Key insights for companies and investors". Switzerland: United Nations Environment Programme Finance Initiative and World Business Council for Sustainable Development, pp. 33-40
Wasiuzzaman, S., Ibrahim, S. A., & Kawi, F. (2022). Environmental, social and governance (ESG) disclosure and firm performance: Does national culture matter? Meditari Accountancy Research, ahead-of-print(ahead-of-print). https://doi.org/10.1108/ MEDAR-06-2021-1356.
Published
2024-12-01
How to Cite
DAWEI, Zhang; ABDUL LATIFF, Ahmed Razman.
The Relationship Between Environmental, Social and Governance (ESG) Disclosures and Firm Performance.
International Journal of Business and Technology Management, [S.l.], v. 6, n. 4, p. 425-435, dec. 2024.
ISSN 2682-7646.
Available at: <https://myjms.mohe.gov.my/index.php/ijbtm/article/view/28495>. Date accessed: 24 jan. 2025.
Section
English Section
