When Environmental, Social, and Governance (ESG) Meets Shareholder Value: Unpacking the Long-Term Effects with a Multi-Period Difference-in-Differences (DID) Approach

As environmental, social, and governance (ESG) concerns increasingly shape corporate behavior, understanding their financial implications remains critical. This study investigates the impact of ESG performance on shareholder value, focusing on the mediating role of dividend policy. A multi-period difference-in-differences (DID) approach is applied to panel data from Chinese A-share listed firms between 2011 and 2022 to address endogeneity and establish causal inference. The empirical findings indicate that strong ESG performance significantly enhances shareholder value and that dividend policy is a credible transmission mechanism by signaling financial stability and governance quality. Heterogeneity analysis reveals that the magnitude of the ESG effect is further shaped by firm size, profitability, and ownership concentration, with larger, more profitable, and less concentrated firms benefiting more. Industry-level analysis reveals stronger ESG effects in capital- and technology-intensive sectors, with comparatively minor effects in labor-intensive industries. These results extend the literature by clarifying how ESG translates into financial value and by identifying contextual conditions that amplify or attenuate its impact. The findings also offer practical insights for aligning ESG strategies with financial policies and tailoring sustainability regulation to organizational and industry-specific dynamics.