Economic Policy Uncertainty, ESG, and Corporate Performance

Based on a sample of Chinese A-share non-financial listed firms from 2009–2020, this paper investigates the effect of economic policy uncertainty on corporate financial performance and the moderating effect of ESG ratings. The paper finds that economic policy uncertainty has a negative impact on corporate performance and finds that ESG rating performance is able to mitigate the negative impact of economic policy uncertainty on corporate financial performance when considering the ESG ratings of the firms in the sample. It enriches the research on the economic consequences of economic policy uncertainty and supplements to the literature of corporate performance and ESG practices. This paper suggests that incorporating ESG practices facilitates firms risk management.