ESG Performance and Enterprise Value in China: A Novel Approach via a Regulated Intermediary Model

Xuming Shangguan, Gengyan Shi and Zhou Yu ()
Additional contact information
Xuming Shangguan: Business School, Xinyang Normal University, Xinyang 464031, China
Gengyan Shi: College of Business Administration, Capital University of Economics and Business, Beijing 100070, China
Zhou Yu: Department of Family and Consumer Studies and Asia Center, University of Utah, Salt Lake City, UT 84112, USA

Sustainability, 2024, vol. 16, issue 8, 1-18

Abstract: ESG (environmental, social, and governance) performance increasingly influences enterprise valuation. While researchers debate about the precise nature of this influence, most assume a positive linear relationship. This study introduces a novel ESG responsibility performance metric utilizing a regulated intermediary model using representative data synthesized from leading ESG rating agencies in China. It investigates the pathways of this influence and examines the mediating effects of corporate reputation, stakeholder engagement, and regulatory compliance. The findings reveal an inverted U-shaped relationship between ESG performance and enterprise value, moderated significantly by financing constraints. These findings remain robust after accounting for potential endogeneity using instrumental variables. Heterogeneity analysis highlights that this inverted U-shaped relationship depends on the industry characteristics and ownership structures, particularly noticeable in non-polluting and non-state-owned enterprises. Moreover, enhanced ESG performance correlates with a reduced cost of equity financing, thereby augmenting enterprise value. Financial institutions might consider employing innovative financial instruments to diversify their enterprise financing channels and effectively bolster ESG-focused enterprises.

Keywords: ESG; enterprise valuation; corporate sustainability; the regulated intermediary model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/16/8/3247/pdf (application/pdf)
https://www.mdpi.com/2071-1050/16/8/3247/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:16:y:2024:i:8:p:3247-:d:1374930

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().