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<p>This paper investigates the impact of corporate Environmental, Social, and Governance (ESG) performance on business risk, utilizing data from Chinese A-share listed companies between 2010 and 2021. The findings indicate that corporate ESG performance is significantly and negatively correlated with business risk. This correlation is particularly pronounced in heavily polluting, high-tech, and capital-intensive industries. A mechanistic analysis suggests that strong ESG performance can lower corporate business risk by enhancing the quality of internal controls, alleviating corporate financing constraints, and mitigating principal-agent problems. Additional research indicates that ESG performance is more effective at reducing business risk among firms operating under stricter environmental regulations and external oversight. However, this effect is less pronounced when firms have executives with financial backgrounds. Overall, the findings offer valuable insights into preventing business risks and promoting ESG practices.</p>

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Speculative behaviour or effective policy? Corporate ESG performance and business risk

  • 期刊论文

  • 发表日期：

    2025年8月13日

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  • Lianjun Yao,
  • Danqi Liu,
  • Yuchen Gao

摘要

This paper investigates the impact of corporate Environmental, Social, and Governance (ESG) performance on business risk, utilizing data from Chinese A-share listed companies between 2010 and 2021. The findings indicate that corporate ESG performance is significantly and negatively correlated with business risk. This correlation is particularly pronounced in heavily polluting, high-tech, and capital-intensive industries. A mechanistic analysis suggests that strong ESG performance can lower corporate business risk by enhancing the quality of internal controls, alleviating corporate financing constraints, and mitigating principal-agent problems. Additional research indicates that ESG performance is more effective at reducing business risk among firms operating under stricter environmental regulations and external oversight. However, this effect is less pronounced when firms have executives with financial backgrounds. Overall, the findings offer valuable insights into preventing business risks and promoting ESG practices.