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ESG performance and corporate risk-taking: Evidence from China

Feng He, Cong Ding, Wei Yue and Guanchun Liu

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: Corporate environmental, social and governance (ESG) is vital for sustainable growth, while the motivation of corporate ESG engagement could decide whether ESG participation is green or greenwashing behavior. This paper attempts to understand the motivation of corporate ESG engagement from the firm's risk-taking perspective. Using Chinese publicly listed firm data from 2010 to 2020, we find that ESG rating significantly reduces corporate risk-taking. This finding still holds after a series of robustness tests to address potential endogeneity concerns and alternative risk-taking proxies. Furthermore, the marginal inhibitory impact of ESG on corporate risk-taking is more pronounced in firms with lower information transparency, weaker corporate governance and less external monitoring pressure. Our results shed essential insight on the trade-off between sustainable growth and corporate risk-taking behavior in a relatively weak investor protection institutional environment.

Keywords: ESG; Risk-taking; Corporate governance; Chinese market (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923000662

DOI: 10.1016/j.irfa.2023.102550

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