Impact of ESG Performance on Enterprise Risk

Abstract

ESG is the application and practice of the concept of sustainable development in enterprises, which is highly compatible with China's social and economic development strategy at this stage. At present, corporate ESG performance has become a hot spot of research and practice at home and abroad. Enterprise risk, as an important factor affecting enterprise development, lacks relevant research on the impact of enterprise ESG performance on enterprise risk, not to mention the exploration of the mechanism of the role of ESG performance on enterprise risk. This paper takes China's A-share listed companies in Shanghai and Shenzhen from 2013 to 2022 as the initial sample to study the effect and mechanism of ESG performance on corporate risk. The results of the study show that: ①good corporate ESG performance can significantly reduce corporate risk, and the conclusion still holds after the robustness test; ②mechanism analysis finds that good corporate ESG performance can reduce corporate risk by inhibiting corporate virtual investment. This paper enriches the related research on the economic consequences of corporate ESG, which helps to promote the risk management of listed companies through ESG strategies, and also provides reference for the decision-making of the government, investors and other stakeholders.