Analysis of the Correlation between ESG Performance and Corporate Financial Performance

DOI: https://doi.org/10.62517/jbm.202509302

Author(s)

Xiaoqing Yang, Yiting Wang

Affiliation(s)

School of Management, Hebei University of Geology, Shijiazhuang, Hebei, China

Abstract

This paper employs fixed-effects models, Spearman correlation analysis, and robustness tests to analyze panel data from 25,363 manufacturing companies listed on the A-share market from 2013 to 2023, exploring the impact of ESG performance and its component dimensions on financial performance. The results indicate that overall ESG performance is significantly positively correlated with financial performance. Corporate governance (G) has the most significant positive impact on financial performance, as it directly enhances asset efficiency by optimizing governance structures and reducing agency costs. Social responsibility (S) indirectly lowers financing costs through reputation accumulation. Environmental (E) performance has weaker short-term financial effects and relies on policy coordination and long-term brand value conversion. Robustness analysis results align with benchmark regression, validating the reliability of the research conclusions. This study provides empirical evidence for governments to formulate differentiated incentive policies, for companies to optimize ESG resource allocation, and for investors to develop ESG-oriented investment strategies, holding significant implications for promoting green economic transformation and corporate sustainable development.

Keywords

ESG Performance; Manufacturing Industry; Financial Performance; Fixed Effects Model

References

[1]Liu H Y. The Impact of ESG Practices on Corporate Financial Performance: An Empirical Study Based on Listed Companies in the Yangtze River Delta Region. Management Science, 2022, 36(3): 45-58. [2]Wang S G, et al. The Interactive Relationship between ESG Responsibility Implementation, Competitive Strategy Selection, and Financial Performance: A Case Study of the Manufacturing Industry. Industrial Economics Research, 2022, 40(5): 78-89. [3]An G J, et al. The Industry-Specific Impact of the ESG Framework on Capital Markets Under the Carbon Neutrality Context. Financial Research, 2022, 45(12): 102-115. [4]China Industrial and Commercial Bank Green Finance Research Team. Construction and Application of the ESG Green Rating System. Beijing: China Financial Press, 2017. [5]Cao Q, Xu Q. Theory and Practice of ESG System Construction in the Financial Sector. Financial Forum, 2019, 24(4): 33-42. [6]Bohyun K., et al. The Impact of ESG Practices on Firm Value: Evidence from Korean Firms. Sustainability, 2018, 10(10): 3635. DOI:10.3390/su10103635. [7]Li, Y. W., et al. ESG Disclosure as a Driver of Corporate Value: Evidence from Global Markets. Journal of Corporate Finance, 2018, 52: 101-120. [8]Ionescu, G. H., et al. ESG Factors and Financial Performance in Tourism Industry: Evidence from European Listed Companies. Tourism Management, 2019, 75: 320-331. [9]Mohammad, W. M. W., et al. ESG Disclosure and Firm Value: A Meta-Analysis. Journal of Business Ethics, 2021, 173(2): 345-367. [10]Sani, N. F. A. The Illusion of ESG: A Study on Sustainability Reporting and Firm Performance. Corporate Social Responsibility and Environmental Management, 2020, 27(5): 2125-2138. [11]Bahadori, N., et al. ESG Performance and Profitability in Emerging Markets: Evidence from Asia-Pacific Firms. Emerging Markets Review, 2021, 49: 100823.