The Moderating Role of Country Governance in the Link between ESG and Financial Performance: A Study of Listed Companies in 58 Countries

Zhonghuan Luo, Yujia Li (), Luu Thi Nguyen, Irfan Jo and Jing Zhao
Additional contact information
Zhonghuan Luo: School of Economic and Management, Tongji University, Shanghai 200092, China
Yujia Li: School of Economic and Management, Tongji University, Shanghai 200092, China
Luu Thi Nguyen: Faculty of Business, FPT University, Hanoi 13113, Vietnam
Irfan Jo: School of Economic and Management, Tongji University, Shanghai 200092, China
Jing Zhao: Changjiang Waterway Bureau, Shanghai 200010, China

Sustainability, 2024, vol. 16, issue 13, 1-18

Abstract: Corporate environmental, social, and governance (ESG) performance is expected to positively affect financial performance because it helps firms gain sociopolitical legitimacy from receiving positive stakeholder awareness and gaining key resources. However, the research on the relationship between corporate ESG performance and financial performance has yielded mixed results. This paper explores the impact of the country governance environment on the ESG–financial performance link. We propose that the positive ESG–financial performance relationship is stronger for firms in countries with better governance. Empirical analyses using a large panel dataset covering 11 years and 58 countries support our arguments. We found that countries with more effective governance in political stability, regulatory quality, and control of corruption strengthen the positive ESG–financial performance relationship. The implications of our findings are significant for firms that face different governance environments and develop sustainable business strategies.

Keywords: ESG performance; corporate financial performance; country governance; corporate social responsibility (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/2071-1050/16/13/5410/pdf (application/pdf)
https://www.mdpi.com/2071-1050/16/13/5410/ (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:13:p:5410-:d:1422114

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 ().