Exploring the relationship between ESG performance and firm value in Chinese and US banks

Abstract

This paper explores the relationship between environmental, social, and governance performance (ESGP) and firm value in both emerging and developed economies, with the moderating impact of environmental uncertainty and competitive advantage. Using secondary unbalanced data spanning from 2011 to 2022, we examine both the direct and non-linear effects of ESG performance on firm value, employing advanced econometric estimation techniques such as two-step system GMM (2sGMM) and two-stage least square (2SLS). The analysis finds that: (1) ESG performance positively influences firm value in both Chinese and US banks, and the results remain valid after robustness test; (2) The results also confirm that ESG performance non-linearly influence firm value across the samples, with an inverted U-shape relationship; (3) Additionally, we further investigate the moderating effects of environmental uncertainty and competitive advantage, uncovering that environmental uncertainty dampens the ESGP-firm value relationship, while competitive advantage further amplifies it. This study contributes to the understanding of how ESG performance can act as strategic assets that align managerial and stakeholder interests, and improve firm performance, by underpinning agency, stakeholder, and the resource-based view theory. Practical insights are also provided for policymakers, regulators, and financial institutions regarding the use of ESGP as a competitive tool in uncertain and dynamic market environments.

Keywords: {'name': 'ESGP; Firm value; Environmental uncertainty; Competitive advantage; China; USA'}

Authors & affiliations

Changjun Zheng
Affiliation not supplied

Md Abdul Mannan Khan
Affiliation not supplied

Changjun Zheng
Affiliation not supplied

Rabiul Islam
Affiliation not supplied

Md Mohiuddin Chowdhury
Affiliation not supplied

Md Mohiuddin Chowdhury
Affiliation not supplied

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