Abstract
The impact of corporate social activities on corporate financial performance has become a popular topic in recent decades. Using data from 102 companies listed in the Shanghai and Shenzhen stock exchange markets from 2013 to 2022, this paper examines the correlation between corporate performance, evaluated through three aspects, environmental, social responsibility, and governance (“ESG”), and the firm risk. We obtain data from the China Securities ESG Index System and CSMAR database. The OLS two-way fixed effect regression model is utilized in this study after the Hausman test to examine the association between corporate ESG activity development and company risk. Our empirical results show that ESG and business risk have a negative relationship, and this relation is significant. This paper conducts a robustness test, and we find that the results are still robust after considering more firm characteristics as control variables. Based on this result, this paper also discusses the implications for stakeholders, such as employees, business managers, and financial analysts. Further research prospects are also provided based on the limitations of this research.
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