Research on the Impact of ESG Performance on Financial Performance Based on a Panel Data Fixed-Effects Model

Sukun Chen ()
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Sukun Chen: School of Public Administration MPA Education Center, Shanxi University of Finance and Economics

A chapter in Proceedings of the 2026 4th International Conference on Digital Economy and Management Science (CDEMS 2026), 2026, pp 306-312 from Springer

Abstract: Abstract With the continuous deepening of the concept of sustainable development and responsible investment practices, the impact mechanism of Environmental, Social, and Governance (ESG) performance on corporate financial performance has become an important topic in corporate finance and capital market research. Based on the traditional two-way fixed effects panel model, this paper builds a dynamic multidimensional extended fixed effects model, introducing lagged terms of the dependent variable to characterize the dynamic persistence of financial performance while controlling for individual company effects and time effects, adding ESG squared terms to test for nonlinear effects, and incorporating financing constraints and innovation investment into a mediation effect framework. At the same time, it identifies heterogeneous moderating effects through the interaction terms of ownership nature, market competition, and ESG. To address issues such as reverse causality, omitted variables, and cross-sectional correlation, further corrections and tests are conducted using the instrumental variable method, system GMM estimation, and robust standard errors. The research results indicate that ESG performance has a significant positive effect on corporate financial performance, and that this effect exhibits both nonlinear and heterogeneous characteristics.

Keywords: ESG Performance; Financial Performance; Panel Data; Fixed-Effects Model; Corporate Heterogeneity (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-699-9_33

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DOI: 10.2991/978-94-6239-699-9_33

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