ESG Performance’s Effect on the Firm Performance the Evidence from Chinese A-share Market

Global agreement has emerged on the need to create a green finance system to promote sustainable development. The concept of ESG (Environmental, social and governance) is accepted by the bulk of companies and investors. However, the effect of ESG performance on the firm performance is still not clear. This paper studies this effect with the historical data of 286 Chinese enterprises with A-share listings from 2011 to 2021. The result shows that improving of the company’s ESG performance will lead to higher enterprise performance, especially on the increasing of Tobin’s Q. In addition, the individual Social and Governance score both have a significant impact on the enterprise performance. Through further analysis, in the ESG requirements sensitive industries, for example, the high carbon industry, the ESG performance has a greater influence on the firm performance than that of ESG requirements non-sensitive industries. Therefore, especially for the company within the sensitive industry, the firm can improve its firm performance through improve its ESG performance.