Environmental Governance Performance Research Articles

Firm ownership and ESG performance in European agri‐food companies: The mediating effect of risk‐taking and time horizon

AbstractThe environmental, social, and corporate governance (ESG) performance of European agri‐food companies is crucial amidst sustainability challenges. Employing property rights and agency theory, we investigate the influence of firm ownership structure on ESG performance, and the mediating role of risk‐taking and time horizon. A recursive system of equations is employed to test the model using data from 936 European firms. The findings indicate that investor‐owned firms (IOFs) outperform family firms and cooperatives in terms of ESG performance. Family firms demonstrate a longer time horizon, while IOFs exhibit greater risk‐taking. Risk‐taking and time horizon are positively and negatively associated with ESG performance, respectively. However, we find no evidence of a mediation effect. This paper contributes to the agency and property rights literature by exploring the implications of ownership structure for other firm characteristics and ESG performance, and outlines implications for policymakers and managers in the development of focused interventions towards sustainability.

Environmental Social Governance and Financial Performance: A Symbiotic Relationship in Indian Manufacturing

Studying Environmental, Social, and Governance (ESG) aspects and firm performance is crucial for globally understanding how sustainable practices drive long-term profitability and competitiveness in diverse markets. The research gap lies in the need to empirically test the influence of ESG disclosure on corporate performance through the lens of institutional theory and signaling theory. The study aimed to examine the time-variant impact of ESG on the financial performance (FFP) of Indian manufacturing firms from 2019 to 2022. For the study’s analysis, we utilized a variant of structural equation modelling called the ‘cross-lagged panel model’. The cross-lagged panel analysis measured the association of aggregate ESG and its dimensions with FFP. Our findings suggested that the investment in the aggregate ESG commitment increased the firms’ financial performance among our sample companies. Regarding the individual aspects of ESG, the environmental and societal obligations of the firms had a positive impact on the firms’ earnings, whereas the governance aspect harms the FFP. This study provides beneficial recommendations to policymakers, investors, and portfolio managers based on the analysis.

Factors influencing cross-departmental collaborative performance: evidence from 452 water governance cases in Guangzhou, China

In addressing complex public issues, cross-departmental collaboration encounters challenges that require identification of factors critical to its effectiveness. This study collected data from 452 cases of water governance in Guangzhou using systematic sampling methods, and empirically examined three major perspectives on cross-departmental collaborative performance in them. Modeling results revealed a significant and positive correlation between leaders’ attention to water environmental governance and cross-departmental collaborative performance. Conversely, power fragmentation negatively impacted performance. Greater public participation in water environmental governance was significantly associated with improved cross-departmental performance. This study comprehensively assesses the collaborative performance by incorporating process-oriented and outcome-based dimensions for systematic examination of underexplored questions of horizontal cross-departmental collaboration, going beyond the scope of prior research, which has primarily centered on cross-regional collaboration. Moreover, it offers a refined analytical framework incorporating internal bureaucratic factors and external forces, with an emphasis on the role of public involvement as an independent factor for shaping collaboration. This study contributes to the theoretical understanding of cross-departmental collaborative performance in the Chinese context as a developing country that faces obstacles in decentralized and uncoordinated water governance structures.

The impact of economic uncertainty on corporate ESG performance: Global evidence

This paper examines the impact of economic uncertainty on firms' overall environmental and social governance (ESG) performance in 3448 companies in 40 economies from 2006 to 2022. It is found that the overall ESG performance of corporations improves with increasing economic uncertainty for both, but more so in developed countries than developing countries. Higher competition further strengthens this relationship indirectly in developed countries but directly weakens it in developing countries. The results are also robust to run different model specifications, samples, and time selections. The findings are consistent with the Stakeholder Theory in developing country firms and a larger group of developed country firms. The results also highlight the substantial influence of economic uncertainty on corporate ESG policies, shedding light on the uncertainty-mitigating aspects of corporate ESG performance.

The effect of corruption exposure on the ESG performance of multinational firms

In this paper, we study how exposure to local corruption cultures affects the environmental, social, and corporate governance (ESG) performance of multinational firms. The results show that corruption exposure is negatively related to all three ESG dimensions. This result is robust after considering the interaction between corruption exposure and government quality, with alternative control variables, and with different measures of internationalization. Further, after we examine the interaction between internationalization and corruption exposure, the effect of corruption exposure remains significant. However, the effect of internationalization becomes insignificant. These results indicate that country exposures, such as corruption culture, that underlying internationalization are more important for the ESG performance of multinational companies.

The effect of ESG performance on enterprises’ internationalization : from the perspective of cooperative research and development

ABSTRACT This study constructs a comprehensive and integrated enterprise internationalization (EI) index using data of Chinese A-share listed companies between 2009 and 2019 to explore the effect of environmental, social and corporate governance (ESG) performance on EI. The study finds that firms’ ESG performance can facilitate internationalization, and the result hold after addressing endogeneity and robustness concerns. The mechanism test shows that cooperative research and development (R&D) is a channel through which the process of ESG performance promotes EI. These findings enrich the literature in ESG related fields and provide new insights for enterprises to accelerate the internationalization process.

Advancing understanding of ESG score and executive compensation relationships in the Indian context

This study examines the impact of environmental, social, and corporate governance (ESG) performance metrics on executive compensation in India using a sample of top-listed firms from 2007 to 2021 and controls for various firm-level characteristics. Findings show that a higher ESG score is associated with higher executive compensation. The subsample analyses examines how business-group affiliations and environmental sensitivity affect executive compensation. Results reveal that business-group affiliated firms with higher ESG scores tend to have higher executive compensation than nonaffiliated firms. Moreover, environmentally sensitive firms with higher governance pillar scores, which represent better governance practices, show higher executive compensation. Finally, high ESG scores and executive compensation is associated with better firm performance.

Identifying ESG types of Chinese solid waste disposal companies based on machine learning methods

In the context of China's efforts to combat climate change and promote sustainable development, the solid waste treatment industry's environmental, social, and corporate governance (ESG) performance is receiving significant attention. To comprehensively assess the ESG performance of the solid waste treatment industry and identify company types, this study constructs a targeted ESG evaluation index system based on existing literature, SASB industry standards, and company reports and utilizes a random forest approach combined with K-means clustering to determine indicator weights. Based on this index system, the paper evaluates the ESG performance of 71 solid waste disposal companies (SWDCs) from 2013 to 2021 and identifies their ESG types from static and dynamic perspectives. In the static view, company types are determined based on annual ESG performance, while the dynamic view considers time-series changes to observe the evolution of company ESG types. The results show that the overall ESG performance of SWDCs falls within the 2-8-point range, indicating a noticeable high-low imbalance. Key initiatives to improve ESG performance in this industry include enhancing waste management measures, developing emergency plans, and reinforcing ESG disclosure. From a static perspective, this paper can identify companies into three categories: delayed development, single-wheel-driven, and coordinated development. Finally, from a dynamic perspective considering the time factor, companies are further subdivided into five types: continual leading, growth catch-up, slow progress, fluctuating change, and retrogressive inertia. This study not only provides targeted recommendations for different types of ESG companies but also helps various sectors of society better understand the ESG conditions of this high environmental risk industry, thereby enhancing the regulation and support for its sustainable development.

The Impact of Environmental, Social, and Governance (ESG) Performance on Dividend Policy and Economic Outcomes of Pakistani Firms: A Survey-based Research

The purpose of this study was to measure the effectiveness of environmental, social, and governance performance on the dividend policies of registered firms on the (PSX) Pakistan stock exchange. A data set of 261 respondents from the employees of companies listed on the Pakistan Stock Exchange was collected and analyzed using Smart PLS 3. The findings of measurement model assessment and structural model were used for the analysis of the data. Based on the statistical data, the study found that environmental performance, social performance, and governance performance are three significant antecedents of the dividend policy of registered firms on the Pakistan stock exchange (PSX). The research has contributed to the literature about implications of dividend policy. The policy implications of this research are also significant for improving the dividend policy of firms registered on the Pakistan Stock Exchange. This study also aligns with the Sustainable Development Goals (SDGs), particularly SDG 12 (Responsible Consumption and Production) and SDG 13 (Climate Action), by examining how ESG performance influences dividend policies in firms on the Pakistan Stock Exchange. The findings underscore the importance of integrating sustainability into corporate strategies to enhance financial outcomes and support global sustainability targets.

The impact of environmental, social, and governance performance on financial performance: Evidence from Japanese companies

This study examines the impact of environmental, social, and governance (ESG) performance on the financial performance of companies using the Stakeholder Theory. Sustainability is recognized as one of the most significant concepts for all nations and organizations worldwide. The Japanese government, its corporations, and its culture are not exempt from delivering their nation's sustainability goal with the utmost support. Their initiatives taken towards sustainability include introducing Society 5.0, the 'improved society' concept Japan has contemplated before the rest of the world. Society 5.0 for Sustainable Development Goals (SDGs), which originated in Japan, is an aspiring concept that views changes and challenges as opportunities and proceeds to associate them with medium-to long-term development, which leads to the resolution of global challenges. Financial performance focuses on accounting performance through the Return on Equity (ROE). The ESG scores and financial data of 351 listed companies in Japan from 2018 to 2022 were collected from the Thomson Reuters Eikon data stream to study its impact. The regression analysis shows that all environmental performance (EP), social performance (SP), and governance performance (GP) positively and significantly affect profitability, or the Return of Equity (ROE). Meanwhile, the control variable, firm size (SIZE), does not support the study. The findings also found that all ESG performances positively correlate with each other. These results highlight the importance of ESG policy adoption by companies to improve their financial performance. The study’s contributions add value to Japan’s industry practitioners and stakeholders and highlight the importance of ESG to their nation.

Digital Technologies, Environmental Governance and Environmental Performance: Empirical Evidence from China

This research conducts an empirical analysis of the relationship between digital technologies, environmental governance (assessed through environmental taxes), and China's environmental performance from 1995 to 2020. Additionally, within the framework of the STIRPAT model, the impacts of GDP and urbanization on ecological footprints are examined. This study is distinguished by its innovative approach to evaluating environmental performance via ecological footprints and the application of the Autoregressive Distributed Lag (ARDL) model along with Dynamic Ordinary Least Squares (DOLS), Canonical Cointegration Regression (CCR), and Fully Modified Ordinary Least Squares (FMOLS) as long-run estimators, methodologies not previously applied to this context in China. The findings indicate that digital technologies and environmental taxes contribute to a reduction in ecological footprints, while GDP and urbanization have an adverse effect, increasing ecological footprints. Post-estimation diagnostics confirm the absence of serial correlation and heteroskedasticity, and affirm the normal distribution of the disturbance terms. For a robustness check, the study further employs DOLS, FMOLS, and CCR methods, which corroborate the initial results regarding the beneficial impact of digital technologies and environmental governance on ecological footprints. Based on these findings, the study advises the Chinese government and policymakers to enact more effective environmental tax policies and leverage digital technologies to enhance environmental sustainability in China.

The Impact of Innovation Adoption on Sustainable Business Development in China: the role of Environmental, Social, and Corporate Governance Performance

ESG as a phenomenon appears to be consistent with high quality development of economy of country like China, hence, implementation of ESG is essential to embrace sustainability. Thus, it is imperative to scrutinize the its effectiveness and, in this lieu, the study attempts to scrutinize the effectiveness of innovation adoption on the environmental, social and governance performance, and SBD of the electric vehicle industry in the context of China. Along with it, mediating role of ESG performance has also been explored in the study. Primary data was collected for the study and PLS-SEM methodology was used to evaluate the collected data. Results showcase that innovation adoption is positively correlated with ESG performance and SBD of the electric vehicle industry in China. The outcomes also exposed that the ESG performances significantly mediates the relationship between innovation adoption and SBD. In the light of the evidence, the analysis recommends that organizations must value their ESG performance in order to formulate relatable policies.

Does Digitalization Facilitate Environmental Governance Performance? An Empirical Analysis Based on the PLS-SEM Model in China

The development of digitalization has brought about profound changes in government governance, enterprise production and residents’ daily lives. Whether digitalization inhibits environmental pollution is a question that needs to be answered urgently, as it is of great significance for addressing conflicts between human beings and the ecological environment. Moreover, it provides a theoretical basis for China’s green and sustainable development. China’s environmental governance model is in a new stage of “government, enterprise, and public” multifaceted governance. Therefore, this paper empirically analyzes the impact of digitalization on environmental governance performance and its mediating effect from a multidimensional perspective, using inter-provincial panel data from 2011 to 2020 as a sample and employing structural equation modeling. It is found that digitalization can significantly improve environmental governance performance, while mechanism analysis shows that digitalization improves environmental governance performance through improving government environmental regulation, public environmental participation, and corporate green technology innovation. Heterogeneity analysis shows that the contribution of digitization to environmental governance performance varies significantly according to geographic region and regional innovative capacity. Based on this, policy recommendations are proposed in terms of digitalization construction, the government, public and enterprises to form a multi-governance environmental governance system among the government, public and enterprises.

Environmental and social governance performance and enterprise total factor productivity

AbstractWith the popularity of both green development and sustainable investment concepts, evaluation of environmental performance, social responsibility and corporate governance (ESG) is the way for enterprises to protect the environment and, at the same time, interact with stakeholders. This paper first analyses how ESG influences corporate total factor productivity (TFP), then, using A‐share listed company data from 2009 to 2021, conducts an empirical test proving that ESG greatly boosts TFP. Examination of the intermediate mechanism reveals that ESG can improve TFP by raising R&D investment, enhancing the attention of stakeholders, and increasing internal control capabilities. The heterogeneity study shows that, for state‐owned firms, non‐polluting industries, and small‐scale and low‐market degree enterprises, ESG enhances TFP more. Further analysis indicates that ESG uncertainty and ESG catering behaviour will weaken the fostering impact, but environmental regulation has a beneficial regulatory role.

Bank competition and firm greenwashing: Evidence from China

This study investigates the effects of bank competition on firms’ greenwashing. Using Chinese commercial bank branches’ geographic location data, we reveal that increased competition reduces greenwashing among firms located near more bank branches. The study posits that rising competitive intensity may relieve financial constraints, which weakens firms’ inclination to engage in greenwashing. We combine 11,465 observations of Chinese A-share listed firms from 2011 to 2021, bank location data, and environmental, social, and corporate governance (ESG) performance. Our results demonstrate that the effects are stronger for large, financially constrained firms, and those more highly leveraged, with relevant implications for policymakers focused on the consequences of bank deregulation and firms’ ESG performance.

ESG performance and disclosure quality: does a well-balanced board of directors matter when impression management occurs?

PurposeThis paper explores how the disclosure quality, measured by the abnormal tone of environmental and social report, may determine the environmental, social and corporate governance (ESG) performance of the firm. This study also investigates the impact of the moderator “board of directors” to explore the extent to which a well-balanced board of directors may affect this association within an impression management strategy.Design/methodology/approachThis work uses a sample of 616 firm-year observations using a sample of French firms indexed on SBF120 index from 2010 to 2017. To test the developed hypotheses, the GLS regression is applied and to control for endogeneity issue and sample selection bias, the authors used, respectively, the two stage least square (2SLS) procedure and the Heckman model.FindingsFindings suggest that a well-balanced board of directors moderates the relationship between the ESG performance and the disclosure quality. The positive effect of abnormal tone management on ESG is weakened by the presence of a good structure of the board, attenuating impression management initiatives.Research limitations/implicationsThe research provides evidence of the impact of corporate social responsibility (CSR) reporting quality, in particular disclosure tone management, on the level of ESG performance in the French context. As the board of directors may have a major impact on weakening impression management strategies in particular tone management practices, in order to improve CSR report quality, the authors recommend French companies to ensure a well-balanced board of directors.Originality/valueThis study helps investors to comprehensively evaluate the information disclosed on CSR reports. It unveils that a strong board composition induces better quality of CSR report and brings better ESG performance. Thus, the study results point to the importance of a well-balanced board of directors and the regulation of the narrative disclosure of CSR information.

Negative Media Coverage and Corporate ESG Performance: Evidence from China

Using Chinese A-share listed companies from 2011 to 2020 as a research sample, this paper examines the relationship between negative media coverage and corporate ESG performance using a two-way fixed-effects model. It is found that, first, negative media coverage can effectively promote corporate ESG performance. Second, the mediation mechanism study shows that negative media coverage positively promotes corporate ESG performance by increasing the degree of corporate financing constraints and information asymmetry and prompting corporations to change their ESG governance level. Third, the results of the heterogeneity test find that the positive relationship between negative media coverage and corporate ESG performance is more pronounced among firms without executives with overseas backgrounds, and the positive relationship between the two is more significant after the promulgation of China’s Code of Governance for Listed Companies in 2018. Fourth, further discussion revealed that negative media coverage has the strongest promotion effect on the performance of corporate environmental governance, followed by social governance performance, and lastly, corporate governance performance. The research in this paper contributes to an in-depth understanding of the impact of negative media coverage on corporate ESG performance and provides empirical evidence to facilitate policy formulation related to the role of media monitoring and to fully utilize the media’s role in corporate ESG governance.

Green institutional investors’ shareholding and corporate environmental responsibility

Data on listed companies in China from 2016 to 2022 serve as a research sample to investigate whether shareholding by green institutional investors improves the environmental governance performance and initiatives of listed companies. Shareholding by green institutional investors is shown to improve the environmental performance and initiatives of listed companies. The promotion effect of green institutional investors in improving the environmental performance of listed companies is more evident for non-state-owned enterprises and those in non-heavily polluted industries than their counterparts.

Can the green experience of CEO improve ESG performance in heavy polluting companies? Evidence from China

AbstractThis paper focuses on Chief Executive Officers (CEOs) with green experience, using data from listed companies in China's heavy pollution industry spanning from 2011 to 2021, the study explores the impact of CEO green experience on the Environmental, Social, and Corporate Governance (ESG) performance of companies. The study reveals that CEO green experiences contribute to enhancing firms' ESG performance. The research further unveils that management's green perceptions and corporate green innovations play a partial mediating role in the relationship between CEO green experiences and corporate ESG performance. Heterogeneity analysis indicates that the influence of CEO green experiences on corporate ESG performance is more pronounced in samples characterized by high environmental regulation, capital‐intensive operations, and non‐state ownership. The findings of this study enrich the theory of corporate ESG performance power mechanisms and provide theoretical references for enhancing the ESG performance of heavily polluting firms.

The crowding-out effect of the environmental regulation on corporate sustainability

The analysis of the impact of China’s Environmental Protection Tax (EPT) Law on company environmental, social, and corporate governance (ESG) performance is crucial for a more comprehensive understanding of the EPT Law and to improve corporate practices. Using a difference-in-differences (DID) model with a research sample of 7,055 listed firms in China from 2012 to 2020, we found that the EPT Law significantly improved firms’ overall ESG performance. However, this improvement was mainly driven by significant increases in the environmental (E) score. In contrast, the social (S) score declined significantly after the implementation of the EPT Law, indicating a trade-off between environmental regulation and social responsibility. Further analysis also reveals that the increase in production costs, which led to a decrease in employment and wages, is responsible for the crowding-out of social responsibility. This study not only enhances our understanding of the impacts of environmental regulations on companies but also offers guidelines for policymakers to consider the negative externality of policies, which could serve as a “double-edged sword.”