The Impact Of ESG Performance On Corporate Financial Performance

The report of the 20 th National Congress of the Communist Party of China proposes to accelerate the green transformation of development methods,achieve high-quality development,and most importantly,promote green and low-carbon economic and social development.In this context,ESG(Environmental,Social,and Governance)is based on the concept of sustainable development,and is a comprehensive evaluation of corporate environment,society and corporate governance performance.It has received widespread attention in the process of achieving the goals of "carbon peaking" and "carbon neutrality".Enterprises not only focus on improving their financial performance,but also gradually attach importance to their performance in environmental,social,and corporate governance aspects.If actively assuming ESG responsibilities can promote the survival and development of enterprises,it will greatly stimulate the enthusiasm of the company to improve ESG performance,which is of great significance for promoting sustainable development of the enterprise.Therefore,studying the impact of ESG performance on corporate financial performance has gradually become a key area of concern for all sectors.This thesis uses 1017 listed companies in Shanghai and Shenzhen that received Bloomberg ESG ratings from 2011 to 2020 as research samples to explore the impact of ESG performance on corporate financial performance,analyzes the mesomeric effect of financing constraints,R&D investment and risk taking level in detail,and further discusses the difference of the impact of ESG performance on corporate financial performance from the perspective of heterogeneity.Firstly,this thesis reviews relevant literature and theories related to ESG performance and corporate financial performance.Secondly,relevant hypotheses are proposed based on sustainable development theory,stakeholder theory,resource dependence theory,etc.Finally,the total return on assets of listed companies in China is taken as an indicator to measure their financial performance,the comprehensive performance of ESG rating in Bloomberg database is taken as the core explanatory variable,and the financing constraints,R&D investment and risk bearing level are taken as intermediary variables.The two-way fixed effect model is selected for multiple regression analysis,and the heterogeneity test is conducted according to the company characteristics and industry nature.This thesis found through empirical research that ESG performance can effectively promote the improvement of corporate financial performance,and this conclusion remains robust after correcting for endogeneity,replacing the dependent variable,and replacing the explanatory variable;Further analysis reveals that compared to corporate governance(G),environmental performance(E)and social performance(S)have a more prominent role in improving financial performance.Financing constraints,R&D investment,and risk bearing level play a partial mediating role.ESG performance can improve corporate financial performance by alleviating financing constraints and reducing the level of enterprise risk bearing.It can also improve corporate financial performance by increasing R&D investment.Heterogeneity analysis found that good ESG performance has a more significant impact on the improvement of corporate financial performance in non-state-owned enterprises,non heavily polluting industry enterprises,politically unrelated enterprises,and small-scale enterprises.Finally,based on the empirical analysis results of this thesis,suggestions are proposed for the government,enterprises,and investors.The research of this thesis is conducive to clarifying the mechanism of ESG performance on corporate financial performance,and also has reference value for promoting enterprises to move towards the goal of carbon neutrality and strengthening the construction of enterprise ESG to boost high-quality economic development.