The Moderating Effect of Board Characteristics in the Relationship between ESG and Corporate Financial Performance

Abstract

This study provides a contribution by filling the gap in existing research through an analysis of the relationship between ESG performance and corporate financial performance, as well as the moderating role of board characteristics in between. Using panel data from Chinese A-share listed companies from 2018 to 2022 and employing a fixed-effects model, the study draws the following key conclusions. First, it discovered that ESG scores have a positive and significant impact on the financial performance of Chinese A-share listed companies. Second, the role of board independence as a moderating variable in the relationship between ESG and corporate financial performance was not statistically significant. Third, ownership concentration in Chinese companies was found to play a moderating role in the relationship between ESG performance and corporate financial performance. The results suggest that, in the case of Chinese companies, ownership concentration by management appears to promote ESG activities and consequently enhance financial performance more than maintaining an independent board.