ESG Investment and Financial Performance: Evidence from Listed Companies in China

Qianwen Lu; Jirapong Ruanggoon

doi:10.63944/gv99.JFEMR

ESG Investment and Financial Performance: Evidence from Listed Companies in China

Qianwen Lu (Author)

Faculty of Management Science, Dhonburi Rajabhat University, Bangkok,Thailand

Jirapong Ruanggoon (Primary Contact)

Faculty of Management Science, Dhonburi Rajabhat University, Bangkok,Thailand

DOI:https://doi.org/10.63944/gv99.JFEMR

Keywords:

ESG Investment, Financial Performance, Financing Constraints

Published

02-06-2026

Abstract: This study examined the relationship between ESG performance and financial performance among Chinese listed firms, focusing on nonlinear effects, the mediating role of financing constraints, heterogeneous impacts across industries and firm sizes, and the development of practical ESG guidelines. Using 841 firm-year observations from 137 A-share listed companies during the period 2000–2025, the study employed panel data methods, including fixed-effects regression, mediation analysis, and subgroup analysis, together with expert validation of the proposed guidelines. The results revealed an inverted U-shaped relationship between ESG performance and ROE, indicating an optimal ESG threshold beyond which excessive ESG engagement generated diminishing financial returns. Financing constraints significantly mediated this relationship, as stronger ESG performance improved firms’ access to capital and reduced financing pressure. ESG effects were found to be context-dependent, with stronger positive impacts observed in high environmental impact industries. ESG performance also improved accounting performance among large firms and enhanced market valuation among SMEs. The study further developed evidence-based ESG guidelines for balanced and strategic ESG implementation. These findings contribute to a better understanding of ESG mechanisms in emerging markets and provide practical implications for balancing sustainability objectives and financial performance.

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ESG Investment and Financial Performance: Evidence from Listed Companies in China

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