IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v61y2024ics1544612324000187.html

The mediating role of investor confidence on ESG performance and firm value: Evidence from Chinese listed firms

Author

Listed:
  • Tang, Hua
  • Xiong, Langyu
  • Peng, Ru

Abstract

This study explores how environmental, social and governance (ESG) performance impacts firm value of Chinese listed companies from 2009 to 2022 through external market factors. The analysis indicates that positive ESG performance is beneficial for enhancing investor confidence and thereby enhancing firm value. This positive relationship is more pronounced among eastern enterprises and non-state-owned enterprises. ESG sub items are significantly related to firm value, but the effect size of is different. We conclude that the ESG related activities promotes investor confidence, while the impact of sub item activities on firm value presents different characteristics.

Suggested Citation

  • Tang, Hua & Xiong, Langyu & Peng, Ru, 2024. "The mediating role of investor confidence on ESG performance and firm value: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000187
    DOI: 10.1016/j.frl.2024.104988
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324000187
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.104988?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Bruna, Maria Giuseppina & Loprevite, Salvatore & Raucci, Domenico & Ricca, Bruno & Rupo, Daniela, 2022. "Investigating the marginal impact of ESG results on corporate financial performance," Finance Research Letters, Elsevier, vol. 47(PA).
    2. Alexandre Sanches Garcia & Renato J. Orsato, 2020. "Testing the institutional difference hypothesis: A study about environmental, social, governance, and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 29(8), pages 3261-3272, December.
    3. Hansol Lee & Eunkyung Kweon & Minkyun Kim & Sangmi Chai, 2017. "Does Implementation of Big Data Analytics Improve Firms’ Market Value? Investors’ Reaction in Stock Market," Sustainability, MDPI, vol. 9(6), pages 1-17, June.
    4. Anis Maaloul & Daniel Zéghal & Walid Ben Amar & Sari Mansour, 2023. "The Effect of Environmental, Social, and Governance (ESG) Performance and Disclosure on Cost of Debt: The Mediating Effect of Corporate Reputation," Corporate Reputation Review, Palgrave Macmillan, vol. 26(1), pages 1-18, February.
    5. Manuel Branco & Lúcia Rodrigues, 2006. "Corporate Social Responsibility and Resource-Based Perspectives," Journal of Business Ethics, Springer, vol. 69(2), pages 111-132, December.
    6. Guochao Wan & Ahmad Yahya Dawod, 2022. "ESG Rating and Northbound Capital Shareholding Preferences: Evidence from China," Sustainability, MDPI, vol. 14(15), pages 1-19, July.
    7. Amal Hamrouni & Rim Boussaada & Nadia Ben Farhat Toumi, 2019. "Corporate social responsibility disclosure and debt financing," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 20(4), pages 394-415, May.
    8. Dhasmana, Samriddhi & Ghosh, Sajal & Kanjilal, Kakali, 2023. "Does investor sentiment influence ESG stock performance? Evidence from India," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    9. Muhammad Haseeb & Hafezali Iqbal Hussain & Sebastian Kot & Armenia Androniceanu & Kittisak Jermsittiparsert, 2019. "Role of Social and Technological Challenges in Achieving a Sustainable Competitive Advantage and Sustainable Business Performance," Sustainability, MDPI, vol. 11(14), pages 1-23, July.
    10. Welch, Ivo, 2000. "Herding among security analysts," Journal of Financial Economics, Elsevier, vol. 58(3), pages 369-396, December.
    11. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 1-27, January.
    12. Stephen Brammer & Stephen Pavelin, 2006. "Voluntary Environmental Disclosures by Large UK Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7-8), pages 1168-1188.
    13. Ng, Anthony C. & Rezaee, Zabihollah, 2015. "Business sustainability performance and cost of equity capital," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 128-149.
    14. Birger Wernerfelt, 1984. "A resource‐based view of the firm," Strategic Management Journal, Wiley Blackwell, vol. 5(2), pages 171-180, April.
    15. Stephen Brammer & Stephen Pavelin, 2006. "Voluntary Environmental Disclosures by Large UK Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 1168-1188, September.
    16. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
    17. Zhao, Xiaoxia & Cai, Lianghui, 2023. "Digital transformation and corporate ESG: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    18. Faizul Haque & Collins G Ntim, 2018. "Environmental Policy, Sustainable Development, Governance Mechanisms and Environmental Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 27(3), pages 415-435, March.
    19. Huang, Peng & Lu, Yue & Wu, Ji, 2023. "Does board diversity in industry-experience boost firm value? The role of corporate innovation," Economic Modelling, Elsevier, vol. 128(C).
    20. Gil Cohen, 2023. "The impact of ESG risks on corporate value," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1451-1468, May.
    21. So Ra Park & Jae Young Jang, 2021. "The Impact of ESG Management on Investment Decision: Institutional Investors’ Perceptions of Country-Specific ESG Criteria," IJFS, MDPI, vol. 9(3), pages 1-27, September.
    22. Mohammed Benlemlih & Mohammad Bitar, 2018. "Corporate Social Responsibility and Investment Efficiency," Journal of Business Ethics, Springer, vol. 148(3), pages 647-671, March.
    23. Amal Hamrouni & Rim Boussaada & Nadia Ben Farhat Toumi, 2019. "Corporate social responsibility disclosure and debt financing," Post-Print hal-02521353, HAL.
    24. Wen Qu & Junrui Zhang, 2023. "Environmental, Social, and Corporate Governance (ESG), Life Cycle, and Firm Performance: Evidence from China," Sustainability, MDPI, vol. 15(18), pages 1-21, September.
    25. repec:eme:jaar00:jaar-01-2018-0020 is not listed on IDEAS
    26. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lai, Fujun & Cheng, Xianli & Li, An & Xiong, Deping & Li, Yunzhong, 2025. "Does flood risk affect the implied cost of equity capital?," Finance Research Letters, Elsevier, vol. 71(C).
    2. Zhang, Hua & Lai, Jie, 2024. "Greening through ESG: Do ESG ratings improve corporate environmental performance in China?," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    3. Waleed S. Alruwaili, 2025. "ESG, CSR Strategy, and Board‐Specific Skills: Further Evaluation Across the GCC Region," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(4), pages 4570-4585, July.
    4. Chao Li & Alexander Ryota Keeley & Shutaro Takeda & Daikichi Seki & Shunsuke Managi, 2025. "Investor's ESG tendency probed by pre‐trained transformers," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(2), pages 2051-2071, March.
    5. Lu, Chia-Wu & Wu, Hsueh-Ling & Su, Yu-Hsuan, 2024. "The icing on the cake: ESG effect on the quality factor portfolios," Finance Research Letters, Elsevier, vol. 70(C).
    6. Li, Yong & Qin, Lulu & He, Zixiang, 2025. "Corporate green transformation and bankruptcy risk: Empirical evidence from Chinese manufacturing firms," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    7. Liu, Yuying & Li, Yue-Rong, 2025. "The duration of Social Security Fund shareholding and investment efficiency," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    8. Chomachaei, Fahimeh & Kaffash, Sepideh & Ertugrul, Mine, 2026. "Sustainability and financial performance: How efficiency mediates the ESG-financial performance relationship in the Airline industry," Journal of Air Transport Management, Elsevier, vol. 133(C).
    9. Geng, Yini & Zheng, Zhiqiang & Yuan, Xuemei & Jiménez-Zarco, Ana Isabel, 2025. "ESG performance and total factor productivity of enterprises: the role of digitization," Research in International Business and Finance, Elsevier, vol. 77(PA).
    10. Kun Lu & Xiangke Sun & Yadong Wang & Khaldoon Albitar, 2025. "ESG as a Safeguard: Reducing Executive Opportunistic Behavior in China's A‐Share Market," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(4), pages 4389-4402, July.
    11. Wang, Ziyuan & Zhang, Cong & Wu, Ran & Sha, Lina, 2024. "From ethics to efficiency: Understanding the interconnected dynamics of ESG performance, financial efficiency, and cash holdings in China," Finance Research Letters, Elsevier, vol. 64(C).
    12. Yang, Ruoying & Li, Xiangrong, 2025. "Tax deductions, financial leverage, and firm value," Finance Research Letters, Elsevier, vol. 86(PB).
    13. Rahat, Birjees & Nguyen, Pascal, 2024. "The impact of ESG profile on Firm's valuation in emerging markets," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    14. Sharma, Rajat & Chawla, Sonia & Dagar, Vishal & Kagzi, Muneza & Rao, Amar, 2025. "SDG adoption and firm risk: The impact of ESG performance, investor confidence, and agency cost," International Review of Economics & Finance, Elsevier, vol. 101(C).
    15. Haoming Ding & Wonhee Lee, 2024. "ESG and Financial Performance of China Firms: The Mediating Role of Export Share and Moderating Role of Carbon Intensity," Sustainability, MDPI, vol. 16(12), pages 1-21, June.
    16. Xu, Mengmeng & Wang, Zihao & Zhou, Yanjiao & Wang, Feng & Wu, Zhan, 2025. "Environmental information transparency and firms' sustainable development: Evidence from automatic environment monitoring and information disclosure in China," Energy Economics, Elsevier, vol. 150(C).
    17. Nha Minh Nguyen & Hien Vo Van & Dao Truc Thi Vo & Oanh Kieu Thi Nguyen & Duong Van Bui, 2025. "ESG Practices and Firm Value: A Novel Perspective From Mediating and Moderating Components," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(5), pages 5918-5939, September.
    18. Qiang, Qunli & Li, Sijia & Meng, Lingmei & Lei, Yuan, 2025. "ESG performance and corporate value creation efficiency: Evidence from China," Finance Research Letters, Elsevier, vol. 81(C).
    19. Siying Wang & Haiqing Hu & Xianzhu Wang & Yusheng Wang, 2025. "Dynamic Evolution of Ambidextrous Digital Innovation Capabilities and the Development of Environmental, Social and Governance Performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(5), pages 5833-5857, September.
    20. Yang, Haiyan & Tang, Feier & Hu, Fang & Yao, Daifei, 2025. "Corporate ESG performance and abnormal cash dividends," International Review of Financial Analysis, Elsevier, vol. 102(C).
    21. Loang Ooi Kok, 2025. "From Tweets to Trades: The Dynamic Dance of Investor Sentiment, Attention, and News Sentiment in ESG Stocks," China Finance and Economic Review, De Gruyter, vol. 14(1), pages 70-91.
    22. Jiahua Zhang, 2026. "The dual impact of ownership concentration and financial performance on ESG activities: evidence from Chinese listed companies," Electronic Commerce Research, Springer, vol. 26(2), pages 2345-2369, April.
    23. Petrică (Papuc), Iuliana Mădalina, 2025. "The impact of ESG disclosure on firm value: evidence from the tourism industry," CACTUS – Journal of Tourism Business, Management and Economics, ASE Publishing House, vol. 7(1), June.
    24. Changjun Zheng & Md. Abdul Mannan Khan & Mohammad Morshedur Rahman & Syed Moudud-Ul-Huq & Md. Shahinur Rahman, 2025. "ESG Performance and Financial Stability: A Bibliometric and Meta-Analysis," SAGE Open, , vol. 15(4), pages 21582440251, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bita Mashayekhi & Kaveh Asiaei & Zabihollah Rezaee & Amin Jahangard & Milad Samavat & Saeid Homayoun, 2024. "The relative importance of ESG pillars: A two‐step machine learning and analytical framework," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(5), pages 5404-5420, October.
    2. Duy Thanh Nguyen & David Michayluk & Gerhard Van de Venter & Scott Walker, 2025. "Improvement in sustainability: Evidence from the mergers and acquisitions market," Australian Journal of Management, Australian School of Business, vol. 50(2), pages 484-523, May.
    3. Siyu Shen & Jun Xie & Hidemichi Fujii & Alexander Ryota Keeley & Shunsuke Managi, 2025. "Does environmental materiality matter to corporate financial performance: Evidence from 34 countries," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(2), pages 2390-2411, March.
    4. Malik, Neha & Kashiramka, Smita & Sharma, Prashant, 2026. "ESG disclosures and capital structure: An analysis of debt and equity dynamics in India," International Review of Economics & Finance, Elsevier, vol. 105(C).
    5. Massimo Postiglione & Cristian Carini & Alberto Falini, 2024. "ESG and firm value: A hybrid literature review on cost of capital implications from Scopus database," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(6), pages 6457-6480, November.
    6. Ishmael Tingbani & Lyton Chithambo & Venancio Tauringana & Nikolaos Papanikolaou, 2020. "Board gender diversity, environmental committee and greenhouse gas voluntary disclosures," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2194-2210, September.
    7. Douglas A. Adu & Antoinette Flynn & Colette Grey, 2022. "Executive compensation and sustainable business practices: The moderating role of sustainability‐based compensation," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 698-736, March.
    8. John Garcia, 2024. "Herding the crowds: how sentiment affects crowdsourced earnings estimates," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(3), pages 331-370, September.
    9. John Garcia, 2021. "Analyst herding and firm-level investor sentiment," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 461-494, December.
    10. Li, WeiWei & Padmanabhan, Prasad & Huang, Chia-Hsing, 2024. "ESG and debt structure: Is the nature of this relationship nonlinear?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    11. Zaremba, Adam & Szyszka, Adam & Karathanasopoulos, Andreas & Mikutowski, Mateusz, 2021. "Herding for profits: Market breadth and the cross-section of global equity returns," Economic Modelling, Elsevier, vol. 97(C), pages 348-364.
    12. JaeYeon Sim & Kyungmyung Jang, 2023. "Blockchain innovation and firm’s financial performance: patent analysis based on firm-level information," Applied Economics, Taylor & Francis Journals, vol. 55(60), pages 7178-7193, December.
    13. Liu, Yang Stephanie & Zhou, Xiaoyan & Yang, Jessica Hong & Hoepner, Andreas G.F. & Kakabadse, Nada, 2023. "Carbon emissions, carbon disclosure and organizational performance," International Review of Financial Analysis, Elsevier, vol. 90(C).
    14. Zain Ul Abideen, 2025. "The moderating role of investor sentiments between sustainability reporting and firm reputation. Evidence from Chinese listed firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(1), pages 138-159, January.
    15. Alves, Carlos Francisco & Meneses, Lilian Lima, 2024. "ESG scores and debt costs: Exploring indebtedness, agency costs, and financial system impact," International Review of Financial Analysis, Elsevier, vol. 94(C).
    16. Khan, Muhammad Arif, 2022. "ESG disclosure and Firm performance: A bibliometric and meta analysis," Research in International Business and Finance, Elsevier, vol. 61(C).
    17. Rohan Kumar Mishra & Frank Obenpong Kwabi & Abhijeet Chandra, 2025. "Corporate Social Responsibility, Related Party Transaction and Earnings Management: Evidence from India," Journal of Business Ethics, Springer, vol. 201(2), pages 331-369, October.
    18. Wei Jiang & Xin Wang & Liping Liang & Mingming Leng & Xin Fang, 2025. "ESG Ratings as a Strategic Imperative: Unraveling Their Influence on Corporate Financial Performance in China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 9313-9337, June.
    19. Emerald Edem Welbeck & Godfred Matthew Yaw Owusu & Rita Amoah Bekoe & John Amoah Kusi, 2017. "Determinants of environmental disclosures of listed firms in Ghana," International Journal of Corporate Social Responsibility, Springer, vol. 2(1), pages 1-12, December.
    20. Ruan, Qingsong & Wang, Zilin & Zhou, Yaping & Lv, Dayong, 2020. "A new investor sentiment indicator (ISI) based on artificial intelligence: A powerful return predictor in China," Economic Modelling, Elsevier, vol. 88(C), pages 47-58.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000187. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.