The role of ESG performance in the nexus between economic policy uncertainty and corporate investment

Cong Zhang, Umar Farooq, Dima Jamali and Mohammad Mahtab Alam

Research in International Business and Finance, 2024, vol. 70, issue PB

Abstract: In an era of economic globalization, the stability and sustainability of investment decisions have gained paramount importance. In view of this, the main focus of this study is to investigate how environmental, social, and governance (ESG) performance moderates the connection between economic policy uncertainty (EPU) and corporate investment (CINV). To achieve this objective, a comprehensive dataset spanning 13 years, from 2010 to 2022, covering BRICS nations, were employed. The findings reveal a negative impact of EPU on corporate investment. EPU-induced uncertainties create a climate of risk aversion, leading firms to delay or reduce their investment in long-term projects. In contrast, the analysis highlights a positive and significant relationship between ESG performance scores and corporate investment. Firms with strong ESG performance are more inclined to invest, driven by factors such as enhanced reputation, cost reduction, and sustainable market access. The research unveils a crucial aspect of ESG performance as it plays a moderating role in the EPU-investment relationship. This research contributes to the existing literature by addressing a critical gap, focusing on the moderating role of ESG performance in the EPU-investment relationship. The novelty of study lies in its holistic approach to examining the interconnected dynamics between EPU, CINV, and the moderating influence of environmental, social, and governance (ESG) performance. The findings offer practical guidance for investors and corporate managers.

Keywords: BRICS; Corporate investment; Economic policy uncertainty; ESG performance; ESG scores (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S027553192400151X
Full text for ScienceDirect subscribers only

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:eee:riibaf:v:70:y:2024:i:pb:s027553192400151x

DOI: 10.1016/j.ribaf.2024.102358

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().