Assessing the Impact of ESG Performance on Financial Outcomes: Risk and Innovation as Moderating Factors in China’s A-Share Market

Zixiang Xu ()
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Zixiang Xu: Dongbei University of Finance and Economics, Surrey International Institute

A chapter in Proceedings of the 2025 10th International Conference on Financial Innovation and Economic Development (ICFIED 2025), 2025, pp 587-599 from Springer

Abstract: Abstract The evaluation of Environmental, Social, and Governance (ESG) criteria represents a critical strategic decision for corporations amidst the global trend towards sustainable development. As China transitions from a planned economy to a socialist market economy characterized by market predominance, the significance of ESG integration in corporate management and operations has become increasingly pronounced. This paper integrates macro-level policy frameworks with micro-level corporate financial decision-making, utilizing data from A-share listed companies in Shanghai, Shenzhen, and Beijing spanning from 2014 to 2023. It systematically investigates the influence of ESG performance on corporate financial outcomes and rigorously examines the moderating effects of corporate risk and innovation levels on the ESG-financial performance nexus. The findings indicate that robust ESG performance exerts a favorable long-term impact on financial performance. Notably, both risk and innovation levels exert negative moderating effects on the ESG-performance relationship, offering critical insights into the conventional practice of substantial investments in innovation. This study augments the empirical literature on the ESG-corporate performance relationship, underscores the pivotal role of ESG strategies in enhancing long-term financial outcomes, and furnishes a practical foundation for corporate leaders in the formulation of sustainable development strategies. Furthermore, this research provides policy recommendations and strategic guidance for governments and corporations in navigating market fluctuations and advancing sustainable development objectives.

Keywords: ESG Evaluation; Financial Performance; Risk Management; Innovation Dynamics (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-702-1_62

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