Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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The Characteristics of ESG and Effect on Corporate Value of Chinese Firms

중국 기업의 ESG의 특징과 기업가치에 대한 영향

  • Shao-Wei Xue (Department of Finance, Graduate School of Soongsil University) ;
  • Jae-Hyun Lee (Department of Finance, Soongsil University)
  • 소소위 (숭실대학교 대학원 금융학부) ;
  • 이재현 (숭실대학교 금융학부)
  • Received : 2023.02.28
  • Accepted : 2023.03.25
  • Published : 2023.03.31
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Abstract

Purpose - Since the 2020s, the management philosophy of Chinese firms' ESG has been rapidly established under the leadership of the Chinese government. We empirically analyze the ESG characteristics and effects on corporate value of Chinese firms. Design/methodology/approach - Using OLS and random effect panel regression analysis, we identify ESG determinants. In analyzing the impact on corporate value, likewise a large number of literatures, we adopt a 2SLS methodology using instrumental variables in the reason of endogeneity between ESG and firm value. We analyze using the G2SLS methodology, which is improving the efficiency of the estimation coefficients along with 2SLS. Findings - We find that ESG ratings are high in state-owned and foreign capital invested companies, ESG ratings are low in companies with a high proportion of non-floating stocks which implies information asymmetry. However, there are no significance in the institutional investor's, the major 10 largest shareholders' and manager's ownership. Furthermore, we can support most of the hypotheses that ESG ratings will be high in companies with high management performance. ESG ratings are significantly higher in companies with high ROA, rich in cash asset, low debt ratio, and large size. we strongly support the hypothesis that the higher the ESG rating, the higher the firm value, and ESG has a moderating effect on state-owned companies, non-floating shares, the ownership of institutional investors, manager, and the 10 major shareholder. In particular, state-owned companies, the proportion of non-floating shares, and the ownership of the 10 major shareholders have a negative impact on firm value, however, ESG attenuates this negative effect. Research implications or Originality - This study looks forward to enhancing our understanding of ESG characteristics in East Asia.

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