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Can ESG construction enable enterprises to move from virtual to real?

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  • Cai, Yunpeng
  • Yu, Yang
  • Ma, Yue
  • Chen, Hong

Abstract

This study examines whether ESG performance restrains corporate financialization in China. Using a panel of Chinese listed firms from 2010 to 2022, we find that ESG performance reduces firms’ financial asset holdings. The results are robust to alternative measures, firm and time fixed effects, and a battery of endogeneity tests. Channel evidence suggests that ESG operates by dampening peer-driven investment, improving internal governance, and disciplining product-market competition. The effect is stronger among mature firms, firms with greater growth opportunities, and those facing higher environmental uncertainty. These findings clarify the governance role of ESG in emerging markets.

Suggested Citation

  • Cai, Yunpeng & Yu, Yang & Ma, Yue & Chen, Hong, 2026. "Can ESG construction enable enterprises to move from virtual to real?," Finance Research Letters, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finlet:v:93:y:2026:i:c:s154461232600156x
    DOI: 10.1016/j.frl.2026.109625
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