The Dynamic Relationship Between Corporate ESG Performance and Stock Returns

Corporate environmental, social, and governance (ESG) performance is increasingly becoming a crucial consideration when making investment decisions as the worldwide movement toward sustainable development picks up speed. In order to test the dynamic relationship between corporate ESG performance and stock returns, as well as the moderating effect of industry differences, this study employs multiple linear regression analysis on research samples of listed companies in China's Shanghai and Shenzhen A-share market from 2012 to 2018. The findings indicate a positive correlation between stock returns and business ESG performance. A company's competitiveness and risk-taking capacity can be improved by good ESG performance, which will increase long-term stock returns. Corporate ESG performance not only affects current - period stock returns but also future - period returns, with a sustained positive effect. The sensitivity of different industries to ESG performance varies. Firms in environmentally sensitive and dependent industries need to focus on environmental management to raise stock returns, while those in environmentally neutral industries should make progress in social and governance aspects to meet investor and social expectations. This study offers a basis for long - term investment decisions based on ESG factors and theoretical support for companies to enhance ESG performance and increase shareholder value. Additionally, it enhances the body of knowledge regarding the connection between financial success and ESG.