Does ESG protect firms equally during crises? The role of supply chain concentration

Na Li, Guo Li and Jing Xue

Omega, 2025, vol. 130, issue C

Abstract: The notion of environmental, social and governance (ESG) has been used by firms as a tool to resist crises. The aspect of ESG that enhances firm viability remains uncertain, as does whether this aspect varies across firms that exhibit distinct supply chain concentrations (SCCs). Clarifying these issues is essential for companies’ attempts to tailor their ESG portfolios in the context of operations to suit their unique circumstances and to improve supply chain viability. The COVID-19 pandemic offers an opportunity to examine these issues. Our study utilizes data regarding Chinese listed firms to conduct an empirical assessment of how ESG affects stock market performance in response to the increase in COVID-19 cases both within China (the national outbreak) and at the global level excluding China (the global pandemic). The results reveal that a significant decline in stock returns occurred as COVID-19 cases increased. Firms that exhibited higher levels of preexisting ESG performance were associated with a less pronounced decrease in stock returns during the national outbreak. Notably, environmental and social responsibilities emerged as key protective factors in response to the national COVID-19 outbreak, while corporate governance proved to be more effective with regard to addressing the global pandemic. In addition, our study reveals that the safeguard provided by environmental and social responsibilities functions as a form of insurance primarily among low-SCC firms. On the other hand, the protective effect of high corporate governance is more evident among high-SCC firms. These findings offer valuable insights for companies seeking to fine-tune their ESG portfolios and navigate the interactions between ESG and SCC.

Keywords: ESG; Viability; Supply chain concentration; Market performance; COVID-19 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.omega.2024.103171

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