ESG complementarity in emerging market: Evidence from China

Seong K. Byun, Sulei Han, Jong-Min Oh and Jing Xu

Finance Research Letters, 2025, vol. 73, issue C

Abstract: This paper examines how firms in China approach environmental, social, governance (ESG) investments, with a particular focus on whether ESG components are viewed as complementary or substitutive. We find that the environmental component acts as a substitute for governance, suggesting a competition for resources. Conversely, the social component complements both environmental and governance initiatives, indicating synergies. These findings reveal that firms in emerging markets strategically optimize ESG investments, balancing limited resources within unique institutional frameworks. Our results highlight the complex interplay between ESG components in emerging markets and provide insights into how firms prioritize and integrate various aspects of ESG.

Keywords: ESG; Complementarity; Substitutability; China; Emerging market (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016477

DOI: 10.1016/j.frl.2024.106618

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