Impact of ESG on Chinese-Listed Companies: From a New Perspective of Firm Value

The lack of reliable indicators of firm value leads to the overestimation or underestimation of the impact of environmental, social, and governance (ESG) on it. Hence, this study adopts a composite firm value indicator that takes into account a firm’s current operation and expectations of the market outlook. Based on 1,511 Chinese A-share listed firms from 2009 to 2023, our results show that, firstly, ESG improvement raises the firm value. Secondly, pillars of “E” and “S” both positively affect firm value. At the same time, there is a negative nexus between “G” and firm value. Thirdly, given the heterogeneity of the firm, the nexus between ESG and firm value can be affected by ownership structure, location, and specific industries. In addition, sensitivity testing is conducted on the composite indicator and robustness tests such as alternative ESG ratings, two-stage least squares and the propensity score matching method are carried out to confirm the unbiasedness of the results. Our findings deepen the understanding of the association between ESG and firm value, contributing to various stakeholders’ implementation of the ESG philosophy.