Relationship between SMEs’ ESG performance and value creation in China: the moderating role of government subsidies

Weidong Zhu, Xue Hu, Yong Wu and Tianjiao Zhang

Journal of the Asia Pacific Economy, 2025, vol. 30, issue 2, 551-574

Abstract: This paper uses Chinese small and medium enterprises (SMEs) as a research sample to explore the relationship between environment, social responsibility, governance (ESG) performance and firm value creation and to test the moderating effect of government subsidies. In addition, we classify government subsidies into innovation, social responsibility, and development subsidies using a Biterm Topic Model (BTM) to explore the heterogeneous moderating effects. The results show an inverted U-shaped relationship between ESG performance and value creation in Chinese SMEs. Government subsidies have a significant moderating effect on the inverted U-shaped curve of ESG performance and value creation, and the moderating effect of different government subsidies also varies. An increase in social responsibility subsidies makes the curve inflection point shift to the left, an increase in development subsidies makes the inflection point shift to the right and the curve steeper, and innovation subsidies have no moderating effect.

Date: 2025
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DOI: 10.1080/13547860.2024.2305307

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