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Competitive Pressure and ESG

Author

Listed:
  • Vesa Pursiainen

    (University of St. Gallen; Swiss Finance Institute)

  • Hanwen Sun

    (University of Bath)

  • Yue Xiang

    (University of Bath)

Abstract

A firm’s exposure to competition is negatively associated with its ESG performance. We measure exposure to domestic product market competition by product market fluidity, based on product text descriptions, and find that higher fluidity - indicating higher product market threats - is associated with lower ESG scores. Fluidity matters more for financially constrained firms, in capital-intensive industries, and for costly activities. Increasing exposure to Chinese import competition is associated with reduction in ESG scores. This effect of import competition is stronger for firms less exposed to domestic competition. Local climate attitudes and social norms moderate the effect of competitive pressure.

Suggested Citation

  • Vesa Pursiainen & Hanwen Sun & Yue Xiang, 2023. "Competitive Pressure and ESG," Swiss Finance Institute Research Paper Series 23-69, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2369
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    More about this item

    Keywords

    competition; product market threats; ESG; sustainability; international trade;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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