ESG performance and corporate financial performance in China: Moderating effects of analyst and media attention

Economic policy uncertainty has a profound impact on firms’ investment decisions, mainly in terms of increased risk and uncertainty for firms when planning future investments. This study aims to explore the impact of corporate economic policy uncertainty on corporate investment, as well as how corporate social responsibility disclosure moderates the relationship between economic policy uncertainty (EPU) and corporate investment. The analysis uses a sample of Chinese listed companies from 2010 to 2022, including 33,791 observations. The study uses ordinary least squares (OLS) regression with clustered standard errors. The basic and robust regression empirical results show that economic policy uncertainty has a negative impact on corporate investment. However, corporate social responsibility plays an important moderating role between them. The two-stage least squares method (2SLS) is used to solve the endogeneity problem of reverse causation. The heterogeneity results show that economic policy uncertainty significantly dampens business investment, while corporate social responsibility (CSR) is effective in mitigating this negative effect, especially among non-state-owned and low-cash-flow firms, where this moderating effect is more pronounced. The study concludes that as corporate social responsibility disclosure enhances information transparency and investor confidence, companies should prioritize CSR programs that ultimately help companies remain competitive and attractive to investors in volatile markets. Meanwhile, this also highlights the strategic importance of CSR in mitigating external risks, such as those presented through volatile economic policies.

This study highlights the complexity of the relationship between sustainability performance, environment, social and governance (ESG) reporting, and tax aggressiveness, which is a critical concern amidst the increasing demands for corporate social accountability. Companies in Indonesia and Malaysia, especially those in the non-financial sector, face increasing regulatory pressure to meet ESG standards. This study uses 263 Indonesian and 311 Malaysian companies as samples because both countries are prominent emerging markets in Southeast Asia with fast-growing economies, diverse industries, and abundant natural resources. However, aggressive tax avoidance remains a common strategy to maintain financial flexibility. This study aims to examine whether companies with high ESG performance tend to reduce tax avoidance practices or use it as a strategy to cover ESG costs. Through 2SLS regression analysis on 2012–2021 data, the results show that ESG performance has a significant positive effect on tax aggressiveness, where companies with high ESG performance also tend to engage in tax avoidance to cover ESG costs. Conversely, tax aggressiveness positively affects ESG performance because companies increase ESG engagement to reduce reputational risks from aggressive tax practices. The simultaneous test found a reciprocal relationship between the two variables with an R² value of 29.4% for tax aggressiveness and 63.1% for ESG performance. This study suggests stricter regulations to reduce tax avoidance in companies with high ESG performance and provides insights for policymakers in Southeast Asia.

This study investigates the relationship between Environmental, Social, and Governance (ESG) performance and financial outcomes, as measured by Return on Assets (RoA), among publicly SRI-KEHATI listed firms in Indonesia. Utilizing panel data from 90 firm-year observations over six years, the analysis employs a Random Effects Model (REM) across three progressively expanded specifications. ESG performance is proxied by the Sustainalytics ESG Risk Score, with higher values indicating poorer ESG standing. The estimation reveals a consistently positive and statistically significant relationship between ESG risk and financial performance. In the baseline model, the coefficient for ESG is 0.598 with a p-value of 0.052. This effect strengthens in the second model (coefficient = 0.768, p-value = 0.010) and remains significant in the fully controlled model (coefficient = 0.724, p-value = 0.017). These results imply that firms with weaker ESG profiles may achieve higher profitability, particularly in emerging markets with lenient ESG enforcement. Sustainable Growth Rate (SGR) also strongly and positively influences RoA (coefficient = 0.740, p-value = 0.002), underscoring the role of sectoral reinvestment capacity. The findings raise critical questions regarding the alignment between ESG efforts and financial incentives in transition economies. Policymakers are urged to consider stronger regulatory frameworks to realign ESG compliance with firm-level profitability. This study contributes to the literature by providing context-specific insights into the paradox of ESG and financial success in under-regulated markets.