The relationship between ESG ratings and the performance of listed companies in China

Abstract

ESG ratings refer to the investment philosophy and method of evaluating and screening companies from the three dimensions of environmental protection (Environment), social responsibility (Social) and corporate governance (Governance). To find out the relationship between the ESG rating and corporate performance, and further explore the moderating role of R&D expenditure in the relationship, and explore whether ESG has a different influence on enterprises of different nature, this paper collects financial data from A-share listed companies from 2018 to 2020. The results show that ESG rating has a significant positive impact on the company's financial performance. Further results show that with the increase of the company's R&D expenditure, the impact of ESG rating on the company's financial performance is gradually increasing. Besides, the analysis shows that the impact of ESG rating on the financial performance of non-state-owned enterprises is smaller than that of state-owned enterprises. Finally, this paper will provide recommendations on instructing companies on what measures they should take to improve their performance based on the aboved results. As the largest developing country, China has suffered from environmental and social problems in the process of achieving remarkable economic development achievements. China has the responsibility and obligation to participate in the solution of short-term issues and actively adapt to world development. In this context, the research in this article can help more people understand the ESG scoring system and green investment concepts, which enable the ESG system to enter the vision of more investors and company managers, thereby influencing China’s investment structure and promoting economic structural transformation. Therefore, it is important to understand the impact of ESG on corporate performance.