Environmental and social governance performance and enterprise total factor productivity

Zhonghua Cheng and Lele Han

International Journal of Finance & Economics, 2025, vol. 30, issue 2, 1411-1428

Abstract: With the popularity of both green development and sustainable investment concepts, evaluation of environmental performance, social responsibility and corporate governance (ESG) is the way for enterprises to protect the environment and, at the same time, interact with stakeholders. This paper first analyses how ESG influences corporate total factor productivity (TFP), then, using A‐share listed company data from 2009 to 2021, conducts an empirical test proving that ESG greatly boosts TFP. Examination of the intermediate mechanism reveals that ESG can improve TFP by raising R&D investment, enhancing the attention of stakeholders, and increasing internal control capabilities. The heterogeneity study shows that, for state‐owned firms, non‐polluting industries, and small‐scale and low‐market degree enterprises, ESG enhances TFP more. Further analysis indicates that ESG uncertainty and ESG catering behaviour will weaken the fostering impact, but environmental regulation has a beneficial regulatory role.

Date: 2025
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