The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors

Chenchen Bao; Yaxuan Tan

doi:10.47297/wspdecWSP2515-797306.20250908

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The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors

9卷第8期

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The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors
The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors
1.School of Economics and Management Southwest Petroleum University, Chengdu, Sichuan, 610500, China
2.School of Foreign Languages, Soochow University, Suzhou, Jiangsu, 215006, China
2025年9卷第8期页码：33-38
纸质出版：2025-08-30
DOI：10.47297/wspdecWSP2515-797306.20250908
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Chenchen Bao & Yaxuan Tan. (2025). The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors. 发展经济学, 9(8), 33-38.

Bao Chenchen,Tan Yaxuan.The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors[J].Development Economics of China,2025,09(08):33-38.
Chenchen Bao & Yaxuan Tan. (2025). The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors. 发展经济学, 9(8), 33-38. DOI： 10.47297/wspdecWSP2515-797306.20250908.

Bao Chenchen,Tan Yaxuan.The Relationship Between ESG Performance and Corporate Financial Performance: Controversies, Mechanisms, and Contextual Factors[J].Development Economics of China,2025,09(08):33-38. DOI： 10.47297/wspdecWSP2515-797306.20250908.

摘要

Abstract

This paper systematically examines the complex relationship between ESG performance and corporate financial outcomes

revealing its controversy

underlying mechanisms

and contextual dependence through theoretical analysis and empirical research. Findings indicate that short-term ESG investments may impose financial pressures due to increased explicit costs (e.g.

direct expenditures on clean energy equipment procurement and pollution control facility construction) and implicit costs (e.g.

indirect expenses for ESG strategic planning and management system development). Some studies show a negative correlation between ESG performance and current stock returns

particularly pronounced under climate risk exposure. Such investments may also exacerbate credit rating inflation

leading to market information asymmetry. Over the medium to long term

ESG practices significantly enhance financial performance through risk mitigation

innovation-driven growth

and resource efficiency improvements: Risk mitigation reduces environmental compliance costs

minimizes labor disputes and negative public incidents

and curbs internal corruption and operational errors. Innovation-driven growth fosters green technology

product

and management innovation

building technological barriers and differentiated competitive advantages. Resource efficiency lowers operational costs and creates market value. Additionally

contextual factors such as industry attributes (high-pollution sectors exhibit significant returns on environmental investments

consumer-oriented industries show pronounced social impacts

and financial sectors rely critically on governance dimensions) and firm size (large enterprises can systematically deploy resources and spread costs

while SMEs should focus on areas yielding immediate returns) significantly moderate this relationship. This research provides theoretical foundations for corporate managers to formulate sustainable development strategies

investors to optimize decision-making

and policymakers to design incentive and regulatory mechanisms. It drives enterprises to transform ESG from a compliance burden into a value creation engine

achieving synergistic enhancement of economic and social benefits.

关键词

Keywords

references

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