From responsibility to value: ESG and long-term corporate value.

Area of Science:

• Business and Economics
• Corporate Finance
• Sustainable Development

Background:

• Inconsistent findings exist on ESG and firm value, particularly in emerging markets.
• Limited research covers ESG practices and value creation in transition economies like China.

Purpose of the Study:

• To analyze the correlation between ESG performance and firms' long-term value in China.
• To investigate the mediating role of Lerner's index in the ESG-firm value relationship.

Main Methods:

• Analysis of data from 4,185 listed companies in China's A-share market (2017-2022).
• Examining the impact of ESG on future cash flows, long-term value, and market competitiveness.
• Investigating the influence of HHI index, property rights, and ISO 9001 certification.

Main Results:

• Good ESG practices significantly enhance firms' future cash flows and long-term value.
• ESG increases long-term firm value by reducing weighted average cost and increasing return on invested capital.
• Lerner's index mediates the ESG-firm value link by improving market pricing power and competitiveness.

Conclusions:

• ESG performance is a key driver of sustainable development and long-term value growth in Chinese firms.
• Integrating ESG concepts into strategic planning is crucial for corporate success.
• Findings provide a reference for managers to implement ESG strategies for enhanced market competitiveness.