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ESG rating and financial performance in the emerging markets: The moderating effects of cross-listing and industry type

Author

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  • Shrestha, Chaman
  • Andrikopoulos, Panagiotis
  • Park, Jin Suk

Abstract

This study examines the moderating effects of cross-listing and industry type on the relationship between environmental, social, and governance (ESG) performance and corporate financial performance (CFP) in emerging markets. We find that only cross-listed firms experience a favorable stock market response to improved ESG performance, particularly when signaling their commitment by listing in a developed market. However, they do not gain operational benefits from ESG activities, unlike non-cross-listed firms, possibly due to bonding costs. Additionally, industry type moderates the ESG-CFP relationship, with consumer goods and financial sectors showing positive market responses, while consumer services and technology sectors benefit in operational performance. Chinese firms exhibit limited gains from ESG efforts. Excluding Chinese firms reveals a negative ESG-CFP relationship in the healthcare sector. Overall, our study provides insights into the complex interplay among ESG, CFP, cross-listing, and industry characteristics, contributing to both theoretical understanding and practical implications for stakeholders.

Suggested Citation

  • Shrestha, Chaman & Andrikopoulos, Panagiotis & Park, Jin Suk, 2025. "ESG rating and financial performance in the emerging markets: The moderating effects of cross-listing and industry type," Research in International Business and Finance, Elsevier, vol. 77(PA).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001722
    DOI: 10.1016/j.ribaf.2025.102916
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    Keywords

    Environmental social and governance; Developing markets; Cross-border listing; Industry effect;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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