Research on the Relationship Between ESG and Corporate Financial Performance

Research Article
Open access

Research on the Relationship Between ESG and Corporate Financial Performance

Muhang Zou 1*
  • 1 College of Letter and Science, University of Wisconsin-Madison, Madison, USA    
  • *corresponding author priscillazmh@outlook.com
AEMPS Vol.186
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-153-2
ISBN (Online): 978-1-80590-154-9

Abstract

In recent years, environmental, social, and governance (ESG) considerations have garnered more scrutiny from scholars, investors, and corporate executives. As ESG practices increasingly influence business activity and the way stakeholders evaluate long-term value, an encompassing question is: does ESG performance actually influence corporate financial performance (CFP)? This paper presents an exhaustive survey of recent scholarly research investigating the ESG–CFP nexus, integrating findings across current studies. The survey also discusses theoretical underpinnings such as stakeholder views, resource management concepts, and agency theory to describe the various ways ESG may affect financial outcomes. To the extent notable, variations across studies arise from differences across ESG dimensions, industry characteristics, governance structure, as well as research method choices. In aggregate, this review not only substantiates an aggregate positive association between ESG and financial performance, but indicates several less-worked-out observations: the asymmetry of ESG effects across ESG dimensions, the magnified influence of ESG at times of crisis, along with the value placed on depth of implementation and governance consonance over simplistic ESG scoring. These conclusions provide a more sophisticated view of how ESG operates as an ideational lever for corporate value generation.

Keywords:

Corporate, Financial Performance, ESG, Positive relationship

Zou,M. (2025). Research on the Relationship Between ESG and Corporate Financial Performance. Advances in Economics, Management and Political Sciences,186,61-67.
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References

[1]. Whelan, Tensie, et al. ESG and FINANCIAL PERFORMANCE: Uncovering the Relationship by Aggregating Evidence from 1,000 plus Studies. 2015.

[2]. Friede, Gunnar, et al. “ESG and Financial Performance: Aggregated Evidence from More than 2000 Empirical Studies.” Journal of Sustainable Finance & Investment, vol. 5, no. 4, 2 Oct. 2015, pp. 210–233, https://doi.org/10.1080/20430795.2015.1118917. Accessed 31 Mar. 2025.

[3]. Ahmad, Nisar, et al. “Revisiting the Impact of ESG on Financial Performance of FTSE350 UK Firms: Static and Dynamic Panel Data Analysis.” Cogent Business & Management, vol. 8, no. 1, 1 Jan. 2021, https://doi.org/10.1080/23311975.2021.1900500. Accessed 31 Mar. 2025.

[4]. Chen, Simin, et al. “Environmental, Social, and Governance (ESG) Performance and Financial Outcomes: Analyzing the Impact of ESG on Financial Performance.” Journal of Environmental Management, vol. 345, Nov. 2023, p. 118829, https://doi.org/10.1016/j.jenvman.2023.118829. Accessed 31 Mar. 2025.

[5]. Aydoğmuş, Mahmut, et al. “Impact of ESG Performance on Firm Value and Profitability.” Borsa Istanbul Review, vol. 22, Dec. 2022, pp. S119–S127, https://doi.org/10.1016/j.bir.2022.11.006. Accessed 31 Mar. 2025.

[6]. Gao, Weizhen, et al. “Analysis of the Impact of ESG on Corporate Financial Performance under the Epidemic Based on Static and Dynamic Panel Data.” Wireless Communications and Mobile Computing, vol. 2022, 1 Sept. 2022, pp. 1–12, https://doi.org/10.1155/2022/6851518. Accessed 31 Mar. 2025.

[7]. Wawers, Arne. An Analysis of the Impact of ESG on Corporate Financial Performance in Europe. Master’s Thesis, Nova School of Business and Economics, 2021

[8]. Nekhili, Mehdi, et al. “The ESG–Financial Performance Relationship: Does the Type of Employee Board Representation Matter?” Corporate Governance: An International Review, vol. 29, no. 2, 14 Oct. 2020, pp. 134–161, https://doi.org/10.1111/corg.12345. Accessed 31 Mar. 2025.

Cite this article

Zou,M. (2025). Research on the Relationship Between ESG and Corporate Financial Performance. Advances in Economics, Management and Political Sciences,186,61-67.

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About volume

Volume title: Proceedings of ICMRED 2025 Symposium: Effective Communication as a Powerful Management Tool

ISBN：978-1-80590-153-2(Print) / 978-1-80590-154-9(Online)
Editor：Lukáš Vartiak
Conference website: https://2025.icmred.org/Bratislava.html
Conference date: 30 May 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.186
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Whelan, Tensie, et al. ESG and FINANCIAL PERFORMANCE: Uncovering the Relationship by Aggregating Evidence from 1,000 plus Studies. 2015.

[2]. Friede, Gunnar, et al. “ESG and Financial Performance: Aggregated Evidence from More than 2000 Empirical Studies.” Journal of Sustainable Finance & Investment, vol. 5, no. 4, 2 Oct. 2015, pp. 210–233, https://doi.org/10.1080/20430795.2015.1118917. Accessed 31 Mar. 2025.

[3]. Ahmad, Nisar, et al. “Revisiting the Impact of ESG on Financial Performance of FTSE350 UK Firms: Static and Dynamic Panel Data Analysis.” Cogent Business & Management, vol. 8, no. 1, 1 Jan. 2021, https://doi.org/10.1080/23311975.2021.1900500. Accessed 31 Mar. 2025.

[4]. Chen, Simin, et al. “Environmental, Social, and Governance (ESG) Performance and Financial Outcomes: Analyzing the Impact of ESG on Financial Performance.” Journal of Environmental Management, vol. 345, Nov. 2023, p. 118829, https://doi.org/10.1016/j.jenvman.2023.118829. Accessed 31 Mar. 2025.

[5]. Aydoğmuş, Mahmut, et al. “Impact of ESG Performance on Firm Value and Profitability.” Borsa Istanbul Review, vol. 22, Dec. 2022, pp. S119–S127, https://doi.org/10.1016/j.bir.2022.11.006. Accessed 31 Mar. 2025.

[6]. Gao, Weizhen, et al. “Analysis of the Impact of ESG on Corporate Financial Performance under the Epidemic Based on Static and Dynamic Panel Data.” Wireless Communications and Mobile Computing, vol. 2022, 1 Sept. 2022, pp. 1–12, https://doi.org/10.1155/2022/6851518. Accessed 31 Mar. 2025.

[7]. Wawers, Arne. An Analysis of the Impact of ESG on Corporate Financial Performance in Europe. Master’s Thesis, Nova School of Business and Economics, 2021

[8]. Nekhili, Mehdi, et al. “The ESG–Financial Performance Relationship: Does the Type of Employee Board Representation Matter?” Corporate Governance: An International Review, vol. 29, no. 2, 14 Oct. 2020, pp. 134–161, https://doi.org/10.1111/corg.12345. Accessed 31 Mar. 2025.

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