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The Impact of ESG Factors on Equity Investment Returns: An Empirical Study Based on the Chinese Stock Market
- 1 School of Economics, Guangdong University of Foreign Studies South China Business College, Guangzhou, 510545, China
- 2 School of Finance, Jiangxi University of Finance and Economics, Nanchang, 330013, China
* Author to whom correspondence should be addressed.
Abstract
As the issue of sustainable development is progressively valued, financial institutions increasingly incorporate ESG (Environmental, Social, and Governance) factors into portfolio construction to achieve risk management and return maximization. This study investigates how ESG factors influence stock investment returns and performance, while analyzing their implications for investment strategies. This study employs a two-way fixed effects model to analyze the relationship between ESG criteria and equity performance in China’s stock market, identifying a meaningful and statistically robust positive association. The findings emphasize the material marginal effects of ESG factors, as incremental improvements in corporate ESG practices systematically translate into measurable financial gains. Notably, firms with superior ESG ratings exhibit persistent long-term outperformance relative to market benchmarks, suggesting that ESG integration serves as a robust predictor of sustainable value creation. This evidence underscores the growing economic relevance of ESG factors considerations in emerging equity markets. As ESG factors serve as critical indicators of corporate sustainability, ESG principles should be proactively incorporated into enterprises’ top-level strategic planning to achieve long-term value creation. Investors are advised to incorporate ESG standards into their strategic decision-making processes to enhance risk mitigation, achieve financial objectives, and incentivize enterprises to advance their ESG practices.
Keywords
ESG Factors, Equity Investment, Two-Way Fixed Effects Model, Stock Returns, Comprehensive Risk Management
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Cite this article
Liang,W.;Quan,L. (2025). The Impact of ESG Factors on Equity Investment Returns: An Empirical Study Based on the Chinese Stock Market. Advances in Economics, Management and Political Sciences,174,20-26.
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Volume title: Proceedings of the 3rd International Conference on Management Research and Economic Development
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