Articlegold2021

Fulfillment of ESG Responsibilities and Firm Performance: A Zero-Sum Game or Mutually Beneficial

Liang Chen · Yuan Tian · Richard J. Cebula · Shuangjin Wang · Maggie C. Foley

51 citations0/0 files storedSustainability

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Corporate Social Responsibility Reporting Environmental Sustainability in Business Corporate Governance and Financial Management

Abstract

Focusing on the 311 Chinese firms listed in the global markets from 2008 to 2019, based on the trade-off theory and the resource slack theory, using panel vector autoregressive model and panel threshold model, this paper explores the impact of fulfilling ESG responsibility on firm performance. The study reveals that in the short run, fulfilling ESG responsibility presents a “Substitution Effect,” whereas, in the long run, it presents a “Promotional Effect.” On the other hand, the improvement of firm performance has a significantly positive impact on ESG fulfillment investment, even though there is a strong hysteresis effect. Significant heterogeneity exists regarding the relationship between ESG fulfillment and firm performance. ESG fulfillment has a negative impact on firm performance in the short run, with the most affected firms being those small and mid-sized firms listed in the Mainland China markets. In the near term, the impact of firm performance on ESG fulfillment is positive, with those listed in the overseas markets and large firms being affected the most. The study reveals that firm size and the factors affiliated with ESG fulfillment tend to cause the differentiation effect in the inhibitory influence of ESG fulfillment on firm performance in the short run. This study could be used as a guideline for the social responsibilities of nonprofit organizations.

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References

1997THE CORPORATE SOCIAL PERFORMANCE-FINANCIAL PERFORMANCE LINK 2015ESG and financial performance: aggregated evidence from more than 2000 empirical studies 2000Corporate social responsibility and financial performance: correlation or misspecification?2012What We Know and Don’t Know About Corporate Social Responsibility 1994The Politics of Stakeholder Theory: Some Future Directions 2009Individual and Corporate Social Responsibility 2011Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility 2016On the Foundations of Corporate Social Responsibility

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