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Economic Policy Uncertainty and Firm ESG Performance

Author

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  • Yiding Wu

    (School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou 341000, China
    Ganjiang Innovation Research Institute, Chinese Academy of Sciences, Ganzhou 341000, China
    Ganzhou Research Institute, Jiangxi University of Finance and Economics, Ganzhou 341000, China)

  • Qiming Guo

    (School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou 341000, China)

  • Jingfei Song

    (School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou 341000, China)

  • Haoxuan Ma

    (School of Economics and Management, Jiangxi University of Science and Technology, Ganzhou 341000, China)

Abstract

Against the background of the impact of multiple uncertain events, such as COVID-19, the Russia–Ukraine conflict, and China–US trade frictions, it is of great strategic significance for enterprises to achieve their own sustainable development by improving ESG (environmental, social, and internal governance) performance. Using the data of Chinese A-share listed companies from 2011 to 2020, this paper empirically explores the effect of economic policy uncertainty (EPU) on corporate ESG performance. We obtain the following results: (1) EPU can promote firms to enhance ESG performance, and in each sub-item of ESG performance, EPU has the strongest promotion effect on corporations’ environmental performance (E), followed by social responsibility performance (S), while EPU has a relatively weak promotion effect on internal governance performance (G). (2) The mechanism test results show that EPU will exacerbate the credit risk of enterprises and then promote the improvement of enterprises’ ESG performance. (3) The grouping test results show that EPU has a stronger promotion effect on the ESG performance of state-owned enterprises, high-carbon industries, low regional marketization level, and enterprises with strong regional government intervention. Against the realistic background of the frequent adjustment of economic policies, the research results provide empirical evidence for guiding enterprises to strengthen the construction of ESG systems.

Suggested Citation

  • Yiding Wu & Qiming Guo & Jingfei Song & Haoxuan Ma, 2024. "Economic Policy Uncertainty and Firm ESG Performance," Sustainability, MDPI, vol. 16(14), pages 1-18, July.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:14:p:5963-:d:1434040
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    References listed on IDEAS

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    1. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    2. Yang, Xite & Zhang, Qin & Liu, Haiyue & Liu, Zihan & Tao, Qiufan & Lai, Yongzeng & Huang, Linya, 2024. "Economic policy uncertainty, macroeconomic shocks, and systemic risk: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    3. Bonaime, Alice & Gulen, Huseyin & Ion, Mihai, 2018. "Does policy uncertainty affect mergers and acquisitions?," Journal of Financial Economics, Elsevier, vol. 129(3), pages 531-558.
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    Cited by:

    1. Serdar Ongan & Ismet Gocer & Cem Işık, 2025. "Introducing the New ESG‐Based Sustainability Uncertainty Index (ESGUI)," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(3), pages 4457-4467, June.

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