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ESG Performance and Corporate Risk in Supply Chain Relationships: The Moderating Role of Supply Chain Efficiency

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  • Jinsung Hwang

    (College of Business, Hankuk University of Foreign Studies, Seoul 02450, Republic of Korea)

Abstract

Supply chain conditions can influence firm risk by shaping operational stability and dependence within customer and supplier relationships. This study examines whether ESG performance mitigates corporate risk in such settings. Using panel data on publicly listed firms, the paper shows that higher ESG scores are associated with lower total volatility, lower idiosyncratic volatility, and lower stock price crash risk. The paper further shows that this risk-reducing effect is more pronounced when firms face greater supply chain dependence or operational instability, as captured by trade credit dependence measures and inventory-based measures. Decomposing ESG into its environmental, social, and governance dimensions, the results show that the stronger risk-mitigating effect of ESG is driven primarily by the governance dimension, with some additional support for the social dimension and relatively weak evidence for the environmental dimension. These findings suggest that ESG is especially valuable in supply chain environments where dependence, instability, and operational frictions are greater. Overall, the results indicate that ESG performance and supply chain conditions jointly shape corporate risk and resilience.

Suggested Citation

  • Jinsung Hwang, 2026. "ESG Performance and Corporate Risk in Supply Chain Relationships: The Moderating Role of Supply Chain Efficiency," Sustainability, MDPI, vol. 18(10), pages 1-38, May.
    • Handle: RePEc:gam:jsusta:v:18:y:2026:i:10:p:4977-:d:1943576
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