Original title: Sustainable development, ESG performance and company market value: Mediating effect of financial performance
ESGA way of assessing a company’s environmental, social, and governance performance. describes how a company performs on environmental, social, and governance issues. The researchers test whether stronger ESG performance is linked to higher market valueThe value the market places on a company., and whether better financial performance helps explain that link. They use rating data for Chinese listed companies from 2014 to 2019 and test the relationships with statistical models. They report that financial performance partly explains the link, with operating capacity playing an important role.
Imagine a café trying to attract more customers by reducing waste and treating workers well. Those choices may also help the café run more smoothly, but it can be hard to tell whether customers value the choices themselves or the better-running business. In this paper, responsible business practices are the café’s choices, operating capacity is how smoothly it runs, and market value is the outcome being explained.
Investors and company leaders care about whether responsible business practices relate to a company’s market value. The study suggests that financial performance—especially operational capacity—helps explain that link, though its evidence comes from Chinese listed companies during 2014–2019.
The abstract describes evidence from Chinese listed companies using ESG ratings from 2014 to 2019. It does not report the size of the effects, establish that ESG performance causes higher market value, or show whether the findings apply to other countries or periods.
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Sustainable development, ESG performance and company market value: Mediating effect of financial performance — Guangyou Zhou, Lian Liu, Sumei Luo — Business Strategy and the Environment — doi:10.1002/bse.3089
Abstract licence: CC BY
Explanation generated by Synthesis from the abstract — it is not the original paper.