Does ESG Performance Affect Firm Risk? Evidence from China

Sanfa Wang, Xiaoxuan Shi, Hui Chen and JingJing Zhao

Emerging Markets Finance and Trade, 2025, vol. 61, issue 13, 4071-4083

Abstract: Integrated environmental, social, and governance performance (ESGP) measures corporate commitment to sustainable development. In China, firms must demonstrate ESGP improvements while pursuing economic growth. This study analyses the impact of ESGP on firm risk, using stock price volatility as a measure. Findings indicate a significant negative effect of ESGP on firm risk, attributed to reduced information asymmetry, institutional stability, and insurance-like protection. Additionally, ESGP positively influences firm financial performance and its interaction with risk. This research highlights the importance of ESG in enhancing investor protection and mitigating risk, especially amid global uncertainty and potential investor losses.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:61:y:2025:i:13:p:4071-4083

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DOI: 10.1080/1540496X.2025.2476117

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