The Impact of ESG Performance on the Value of Chinese Firms

Abstract

Environmental, Social, and Governance (ESG) measures and ratings are more and more important as sustainable investing takes center stage in many markets for capital allocation recently. This study empirically analyzes the effects of ESG performance on corporate value. The paper chooses data from 1375 A-share listed companies in China between 2011 and 2021 and sets up a four-factor capital asset pricing model to analyse ESG factors effect. According to the findings, an enterprise's value increases as its ESG performance increases, but the effect of ESG on companies value is not marked. The heterogeneity analysis reports that ESG performance has a varying effect on enterprise value depending on the industry, and it has a more significant effect on enterprise value when there is policy intervention in an industry. This study provides empirical support for listed firms to pay attention to and enhance ESG performance, as well as clarifies the economic impact of ESG performance.