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Does litigation risk impact corporate ESG performance? Evidence from China

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  • Xing, Kai
  • Zhou, Zhijie
  • Li, Shan

Abstract

This study explores the impact of corporate litigation risk on environmental, social, and governance (ESG) performance using data from Chinese A-share listed firms during 2009–2021. Results show that litigation risk negatively affects ESG performance by increasing information asymmetry and sending adverse signals to stakeholders. This effect is more pronounced in firms with managerial myopia or CEO duality. Furthermore, the negative impact of operating lawsuits on ESG performance is more pronounced than that of securities lawsuits, with negative effects observed across all three ESG pillars. This study provides both theoretical insights and practical implications for improving corporate social responsibility under risk conditions.

Suggested Citation

  • Xing, Kai & Zhou, Zhijie & Li, Shan, 2025. "Does litigation risk impact corporate ESG performance? Evidence from China," Finance Research Letters, Elsevier, vol. 85(PD).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pd:s1544612325014631
    DOI: 10.1016/j.frl.2025.108208
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    References listed on IDEAS

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    1. Elena Moreno‐Ureba & Nuria Reguera‐Alvarado & Francisco Bravo‐Urquiza, 2026. "Female Directors and Corporate Environmental Decoupling: The Moderating Influence of Board Characteristics," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 33(1), pages 1339-1356, January.

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