Too much of a good thing? Exploring the curvilinear relationship between environmental, social, and governance and corporate financial performance

IF 1.9 Q2 ETHICS

Asian Journal of Business Ethics Pub Date : 2022-10-21 DOI:10.1007/s13520-022-00157-y

Eunmi Tatum Lee, Xiaoyuan Li

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Abstract

The effect of environmental, social, and governance (ESG) activities on corporate financial performance (CFP) could be linear or nonlinear. However, inconsistent results remain a research gap and thus need to be re-examined. By drawing on stakeholder theory and the neoclassical economics perspective while using the panel data of 155 Chinese listed firms from 2010 to 2020, system generalized method of moments (GMM) estimation results revealed an inverted U-shaped relationship between ESG and CFP. Moreover, by drawing on the institutional-based view, it was determined that government subsidies moderate the inverted U-shaped relationship between ESG and CFP. Specifically, we found that the inverted U-shaped effect of ESG on CFP is weakened when government subsidies are high. This study contributes to the literature by confirming the presence of a curvilinear relationship between ESG and CFP. This study also generates meaningful implications suggesting that the governmental role in ESG is salient in mitigating associated financial costs for firms, thereby ultimately affecting CFP.

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好事过头反成坏事探索环境、社会和治理与公司财务绩效之间的曲线关系

环境、社会和治理(ESG)活动对企业财务绩效的影响可以是线性的，也可以是非线性的。然而，不一致的结果仍然是一个研究空白，因此需要重新审视。运用利益相关者理论和新古典经济学视角，利用2010 - 2020年155家中国上市公司的面板数据，系统广义矩量法(GMM)估计结果显示ESG与财务绩效之间存在倒u型关系。此外，借鉴基于制度的观点，确定政府补贴调节了ESG与财务绩效之间的倒u型关系。具体而言，我们发现ESG对CFP的倒u型效应在政府补贴较高时减弱。本研究通过确认ESG和CFP之间存在曲线关系，为文献做出了贡献。本研究还产生了有意义的启示，表明政府在ESG中的作用在减轻企业相关财务成本方面是显著的，从而最终影响CFP。

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来源期刊

Asian Journal of Business Ethics ETHICS-

CiteScore

2.60

自引率

38.50%

发文量

期刊介绍： The Asian Journal of Business Ethics (AJBE) publishes original articles from a wide variety of methodological and disciplinary perspectives concerning ethical issues related to business in Asia, including East, Southeast and South-central Asia. Like its well-known sister publication Journal of Business Ethics, AJBE examines the moral dimensions of production, consumption, labour relations, and organizational behavior, while taking into account the unique societal and ethical perspectives of the Asian region. The term ''business'' is understood in a wide sense to include all systems involved in the exchange of goods and services, while ''ethics'' is understood as applying to all human action aimed at securing a good life. We believe that issues concerning corporate responsibility are within the scope of ethics broadly construed. Systems of production, consumption, marketing, advertising, social and economic accounting, labour relations, public relations and organizational behaviour will be analyzed from a moral or ethical point of view. The style and level of dialogue involve all who are interested in business ethics - the business community, universities, government agencies, non-government organizations and consumer groups.The AJBE viewpoint is especially relevant today, as global business initiatives bring eastern and western companies together in new and ever more complex patterns of cooperation and competition.