Can Green Innovation Affect ESG Ratings and Financial Performance? Evidence from Chinese GEM Listed Companies

Jianzhuang Zheng, Muhammad Usman Khurram, Lifeng Chen

2022-07-15articleSustainability170 citationsgold

No readable copy stored yet — this record is metadata only.

Corporate Social Responsibility Reporting Environmental Sustainability in Business Sustainable Finance and Green Bonds

Abstract

Socially and environmentally responsible investing is becoming the benchmark in financial markets. Promoting emerging industries’ environmental performance, social responsibility, and corporate governance (ESG) ratings are increasingly becoming the consensus of multinational green financial institutions, investors, and governments. This study employs 3100 panel data from 2014 to 2019 to conduct empirical research on green innovation, ESG indicators, and the financial performance of China’s Growth Enterprise Market (GEM) listed companies. Based on the “causal steps approach”, we adopt the Sobel–goodman and Bootstrap test to explore the partial mediation effect of ESG indicators. Moreover, when testing the interactive effect of endogeneity, instrumental variables combined with two-stage least squares (2SLS) and a general method of moments (GMM) system are applied in the dynamic panel for robustness. Combing with the approach of ESG factors-integrated and ESG factors-embedded regression models, we find that: (1) Green innovation can significantly improve the ESG scores of GEM listed companies. (2) Both green innovation and ESG performance can improve the financial performances of GEM listed companies, and ESG performance plays an indirect mediating role in the promotion of green innovation on financial performance. (3) Both political connection strength and regional innovation capabilities can negatively moderate the promotion of green innovation on financial performance, and moderating the effect of corporate political connections is more significant than the regional innovation. This study expands the research on the effectiveness of ESG indices and green innovation from the view of micro-GEM companies, providing policy enlightenment for the sustainable development of emerging industries. Our findings provide noteworthy implications for regulators, academicians and practitioners interested in exploring green innovation, ESG rating and financial performance. In addition, providing regulators and the board of directors with insights into the company’s and country’s future growth prospects.

Citations in this library

Stored only when both papers are in the corpus — 170 citations exist upstream.

References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure

1995Toward a New Conception of the Environment-Competitiveness Relationship

1982Asymptotic Confidence Intervals for Indirect Effects in Structural Equation Models

2009How to do Xtabond2: An Introduction to Difference and System GMM in Stata

1990WHAT'S IN A NAME? REPUTATION BUILDING AND CORPORATE STRATEGY.

2015ESG and financial performance: aggregated evidence from more than 2000 empirical studies

2004Stakeholder Theory and “The Corporate Objective Revisited”

2003Measuring innovative performance: is there an advantage in using multiple indicators?

Cited by

2023The impact of environmental uncertainty on ESG performance: Emotional vs. rational

2023Digital transformation, financing constraints, and corporate environmental, social, and governance performance

2023Does digital innovation cause better ESG performance? an empirical test of a-listed firms in China

2024The impact of climate change on corporate ESG performance: The role of resource misallocation in enterprises

2024ESG disclosures, green innovation, and greenwashing: All for sustainable development?

2023An empirical analysis of the impact of ESG on financial performance: the moderating role of digital transformation