The Respective Relationship Between Environmental, Social, Governance and Financial Performance

Based on data from most A-listed Chinese corporations from the China Stock Market & Accounting Research (CSMAR) database in 2023, this study examines the respective influence of Environmental, Social, and Governance (ESG) performance on a corporations financial performance. By utilizing Ordinary Least Squares (OLS) regression models, the study regards return on equity (ROE) as the dependent variable and E, S, and G scores as the independent variable. It delves into the individual contributions of each ESG category to provide investors with a more detailed framework for making investment decisions and offer corporate executors insights into policy implementation to improve profitability. Ultimately, aiming to support both investors and corporate leaders in their efforts to improve financial outcomes through targeted ESG initiatives, this research indicates that among three factors, the governance performance of a corporation can, to the most extent, enhance financial performance, and thereby encourages corporations to prioritize governance in their ESG strategies.