A Review of Research on ESG Performance and Corporate
Performance of Listed Companies
Qianyi Liu
School of Accounting, Wuhan Textile University, Wuhan, China
Keywords: ESG Performance, Corporate Performance, Information Disclosure.
Abstract: The ideas of green development and sustainable development have slowly gained traction in recent years, and
businesses' environmental, social, and corporate governance (ESG) performance has drawn a lot of attention
from a wide range of sources. This paper combs through the research on the relationship between ESG
performance and financial performance, innovation performance and enterprise value, and the impact of ESG
ratings and ESG disclosure on corporate performance. It concludes that there are problems of immature ESG
concept, imperfect ESG rating system, and lack of comparability of ESG ratings. Existing studies have the
limitations of one-sided data and short time span. Current study reveals deficiencies in the depth and breadth
of studies about ESG performance, the ESG grading system, and the mechanisms for ESG information
dissemination. Future long-term, comprehensive multi-industry research should integrate multidimensional
viewpoints, including digital transformation, to enhance the establishment of high-quality ESG and attain
sustainable corporate development.
1 INTRODUCTION
1.1 Background to the Study
Increasingly, individuals are turning conscious of the
ir obligation to safeguard the environment, although
it can be traced back to ancient civilisations such as t
he Greeks and Romans. The Americans created Yell
owstone National Park, the first nature reserve in hist
ory, as a result of growing concerns about environme
ntal degradation in the late 18th century. They also e
ngaged the public in the preservation of wilderness a
nd the enjoyment of nature by encouraging the prese
rvation of natural resources in uninhabited areas. It w
as only with the publication of Rachel Carson's Silen
t Spring in 1962 that the problems of air and water p
ollution and the widespread use of pesticides and oth
er chemicals, which made it difficult to restore ecolo
gical status quo ante in the short term for hundreds o
f years, were brought to the forefront of the public co
nsciousness. The achievements of our predecessors h
ave inspired the modern environmental movement an
d contributed to significant progress in the field of en
vironmental protection. People are more interested in
preserving nature than in conquering it, and it has be
come a global consensus that sustainable developme
nt can be achieved by reducing pollution and carbon
emissions and achieving a harmonious coexistence b
etween human beings and nature.
In the past, there are a large number of enterprise
s manufacturing production caused by environmental
pollution problems, in recent years, reflecting on the
conclusion that enterprises should be in the ecologic
al environment allows the conditions of protective de
velopment. Technological advances continue to deve
lop, the search for cleaner and more environmentally
friendly production methods that don't kill the goose
that lays the golden eggs is a prerequisite for firms
who want economic growth that is sustainable. Gree
n sustainable development, which aims to achieve th
e harmonious coexistence of humans and nature, has
become the rage due to pivotal ecological realm dile
mmas, recurring phenomena of natural variability, an
d significant climatic threats. This is where the ESG
values of sustainable development came from. Origi
nally put forth in June 2004, the United Nations Glob
al Compact (UNGC) concept of ESG was initially pr
esented. It promotes the idea that businesses should f
ocus on commercial operations while taking environ
mental, social, and governance performance into acc
ount. ESG elements encompass three different comp
onents. First, environmental factors include pollution
590
Liu, Q.
A Review of Research on ESG Performance and Corporate Performance of Listed Companies.
DOI: 10.5220/0013271100004568
In Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence (ECAI 2024), pages 590-595
ISBN: 978-989-758-726-9
Copyright © 2025 by Paper published under CC license (CC BY-NC-ND 4.0)
prevention, biodiversity conservation, the circular ec
onomy, and the mitigation and adaptation to climate
change. In addition to the more pressing issues of mi
tigating and adapting to climate change, it is imperati
ve to address the wider facets of environmental prote
ction, such as maintaining biodiversity, preventing p
ollution, and advancing the circular economy. This c
overs resource management, greenhouse gas contain
ment, recycling programs, emissions control, and tra
sh disposal. The social factor then enters the picture,
highlighting the need of loyalty and trust among stak
eholders while addressing inequalities, encouraging i
nclusivity, and enhancing labor relations and commu
nity initiatives. It also entails taking responsibility fo
r the product, protecting human rights, and making s
ure workers are treated fairly. Lastly, corporate gove
rnance must be prioritized, with a focus on the effici
ent management of private companies and organizati
ons. This includes executive remuneration, managem
ent structure, and employee relationsall of which ar
e essential for incorporating social and environmenta
l concerns into business decision-making and uphold
ing the standards of excellent corporate governance.
1.2 Purpose and Significance of the
Study
A non-financial metric that fully captures data on co
mpany governance, social responsibility, and environ
mental preservation is called ESG performance. The
link between how well a business performs and its E
SG milestones has only just gained broad approval.
Business performance usually enhances for compani
es that thrive in ESG. It is becoming more and more
clear how ESG affects a company's operational healt
h, capacity to prosper in its business environment, an
d ability to chart its course for future expansion. The
efficiency and effectiveness of an organization in co
mpleting its goals and objectives within a certain tim
e period is referred to as enterprise performance. The
long-term competitiveness of a business is now seen
as being significantly influenced by the emergence o
f ESG as a key factor, which corresponds to the incre
asing emphasis placed on ESG performance. Numer
ous studies by prior investigators have explored the l
inkage between ESG metrics and corporate success,
aiming to assist firms in enhancing their economic ef
ficiency. However, the results of these studies are mo
re dispersed, so this paper will compile and analyze t
he literature to establish a more intimate relationship
between the two influences for the convenience of f
uture researchers. Enhancing studies on how ESG pe
rformance affects business performance. By incorpor
ating variables that affect diverse aspects of ESG per
formance and their influence on business performanc
e, this research fills a void in the existing literature. E
stablish a foundation of reference for the developme
nt of corporate ESG. ESG considerations have a fina
ncial influence on business profitability and competit
iveness, offering helpful recommendations for busin
esses looking to increase profitability. Participate in i
nvestor and managerial decision-making. To assist bu
siness managers better handle resource allocation chal
lenges and enhance management, investigate and eval
uate how corporate profitability and ESG performance
are related.. Assist investors in predicting future trend
s so they may make better investment choices.
2 ESG PERFORMANCE AND
CORPORATE PERFORMANCE
2.1 Relationship Between ESG
Performance and Financial
Performance, Innovation
Performance and Firm Value
2.1.1 ESG Performance and Financial
Performance
In the developed market sectors, the ESG performan
ce of firms that are particularly attuned to environme
ntal issues tends to receive greater recognition and ex
erts a more pronounced impact on the financial outco
mes of these companies when compared to their cou
nterparts in the developing world. A comprehensive
empirical examination by Naeem et al. (2022) was ca
rried out, utilizing a dataset comprising 305 environ
mentally sensitive firms operating within developed
economies, juxtaposed with a sample of 78 similar fi
rms from developing nations, covering a decade-long
period from 2009 to 2018. The researchers discover
ed that firms demonstrating a high level of ESG perf
ormance not only experience a favorable influence o
n their profitability but also tend to see a boost in the
ir financial success. Moreover, an empirical study ex
ploring the intricate relationship between a company'
s ESG performance and its capacity to innovate withi
n the domain of green technologies has been carried
out by Ming et al. (2022), as well as the moderating i
nfluence of environmental uncertainty on this relatio
nship, has revealed that a robust ESG performance is
capable of effectively catalyzing corporate innovatio
A Review of Research on ESG Performance and Corporate Performance of Listed Companies
591
n. This, in turn, helps to alleviate the financial constr
aints that these firms might face, ultimately leading t
o an enhancement in their performance related to gre
en innovation initiatives.
2.1.2 ESG Performance and Innovation
Performance
In their 2024 study, Cabaleiro-Cerviño & Mendi har
nessed PITEC data in conjunction with a sophisticate
d matching methodology to assess the efficacy of bu
sinesses that believe that at least one ESG element is
pertinent. Specifically, they examined how firms tha
t integrate at least one ESG-related goal into their inn
ovation strategies might experience enhanced perfor
mance when contrasted with their counterparts that d
o not engage with ESG criteria. Furthermore, they so
ught to determine if firms that merge their innovatio
n strategies with ESG objectives demonstrate more a
dvanced achievements than those that do not assign p
riority to ESG factors. The research revealed that bus
inesses focusing on ESG objectives within their inno
vation strategies outperform similar, creative, but ES
G-nonaligned businesses. Moreover, an empirical stu
dy exploring the intricate relationship between a com
pany's ESG performance and its capacity to innovate
within the domain of green technologies has been ca
rried out by Ming et al. (2022) , as well as the moder
ating influence of environmental uncertainty on this
relationship, has revealed that a robust ESG perform
ance is capable of effectively catalyzing corporate in
novation. This, in turn, helps to alleviate the financia
l constraints that these firms might face, ultimately le
ading to an enhancement in their performance related
to green innovation initiatives.
2.1.3 ESG Performance and Corporate
Value
Investing in high ESG performance, as investigated b
y Aydogmus et al. (2022) into its effects on firm valu
e and profitability, can yield financial returns for bus
inesses, with a significant positive correlation having
been discovered between overall ESG composite sc
ores and firm value. According to L. Wang et al. (20
22), effective ESG performance may increase compa
ny value by lowering corporate financial risk, enhanc
ing corporate investment efficiency, and easing corp
orate financing limitations.
2.2 Impact of ESG Ratings and ESG
Disclosure on Firm Performance
2.2.1 ESG Ratings and ESG Disclosure
The ESG framework is constructed from three integr
al components: ESG performance, ESG rating, and t
he transparency of ESG disclosures. Within this syst
em, a positive correlation can be observed between a
company's ESG performance and its ESG rating sco
re; in other words, superior ESG performance is typi
cally rewarded with a higher rating. Additionally, a g
reater degree of ESG disclosure is associated with le
ss stringent financing conditions, which in turn indir
ectly fosters the enhancement of corporate ESG ratin
gs. Consequently, this process facilitates an improve
ment in the overall ESG performance of the corporat
ion.
2.2.2 Impact of ESG Ratings on Firm
Performance
In an exploration aimed at ascertaining the impact of
a company's ESG ratings on its market valuation, G
awęda (2022) postulated a hypothesis suggesting a ro
bust positive correlation between the high ESG ratin
gs of companies within select EU market sectors and
the subsequent influence on their market valuations.
The study revealed that corporate controversies serv
e as a detrimental factor to the market value of comp
anies across all industries, whereas the ESG ratings a
nd the disclosure thereof are key determinants of mar
ket value for companies within particular sectors. Na
(2023) employed an approach that involved an indus
try-by-industry comparison of ESG ratings. The resu
lts indicated that companies boasting high ESG ratin
gs tend to experience comparatively higher earnings
per share and stock returns over the same timeframe
when contrasted with those having lower ratings. Fur
thermore, a significant positive correlation was ident
ified between these two factors, with the effect being
particularly pronounced within the manufacturing a
nd financial real estate industries.
2.2.3 The Impact of ESG Disclosure on Firm
Performance
Reber et al. (2022) have posited that the act of volunt
arily disclosing ESG information by firms is associat
ed with a reduction in downside tail risk and a decrea
se in idiosyncratic volatility. Observations indicate th
at companies which possess higher ESG ratings tend
to exhibit lower levels of volatility that is specific to
the firm, as well as a diminished risk of downside ta
ECAI 2024 - International Conference on E-commerce and Artificial Intelligence
592
il events. This trend is particularly noticeable during
the initial year of their trading activities in the afterm
arket. Furthermore, the performance and disclosure o
f ESG-related metrics are instrumental in helping fir
ms build reputational capital with investors subseque
nt to their listing. Xu et al. (2022) propose in a distin
ct investigation that the disclosure of ESG informatio
n, when done effectively, can lead to an increase in s
tock returns, a decrease in information asymmetry, a
nd a strengthening of a company's overall value, fina
ncial performance, and innovative capabilities.
3 RECOMMENDATIONS
3.1 Improve ESG Rating System and
ESG Information Disclosure
Mechanism
Good ESG performance and a consensus ESG rating
system will promote digital transformation of enterp
rises; a unified standard of ESG disclosure can ease c
orporate financing constraints and promote growth in
corporate performance. The task of evaluating the E
SG performance of companies is fraught with difficu
lties, particularly due to the proliferation of ESG rati
ng organizations in the market that employ differing
rating criteria. This diversity in standards can lead to
inconsistencies and conflicts, which in turn may cre
ate challenges for businesses seeking financing. The
presence of numerous rating systems, each with its o
wn set of criteria, complicates the assessment proces
s and has the potential to result in discrepancies that
can impact a company's ability to secure funding. Fu
rthermore, because of the impact of disputes between
managers and policymakers, more problems arise fr
om corporate decision-making, leading to difference
s in the degree of ESG disclosure across enterprises,
making it difficult to combine digital transformation
with ESG concepts to achieve sustainable corporate
development.
Standardize pertinent information and enhance th
e ESG disclosure and grading systems. Businesses m
ay attain strong ESG performance in part by using th
e ESG grading system and information sharing meth
od. Enhancing business information openness and lo
wering funding challenges may be achieved via a sta
ndardized ESG grading system and information discl
osure method. The ESG system is not particularly so
und at present. The design of many indicators does n
ot match the specific corporate development situatio
n , and the disclosure system is not perfect. For exam
ple, some companies' disclosure is a complete ESG r
eport, while some are sustainability reports or social
responsibility reports. Although the contents are part
ially similar to a certain extent, the format is not unif
orm enough, and the indicators of disclosure are not
uniform . It is imperative that specific disclosure indi
cators be developed in alignment with the unique cha
racteristics of various industries. Such an approach n
ot only facilitates the process of information disclosu
re for businesses but also enhances their ability to en
gage in meaningful comparisons utilizing identical in
dicators. The formulation of these tailored indicators
ensures that companies within a particular sector ca
n more readily disclose relevant information and, co
ncurrently, enables them to undertake more effective
comparisons of performance metrics across the indu
stry. This makes information even more transparent
and helps stakeholders better understand how busine
sses are developing.
3.2 Improving Regulatory and
Incentive Policies for Corporate
ESG Disclosure
Government agencies should make it more difficult f
or businesses to provide ESG information, create a fa
ir system of rewards and penalties, and toughen pena
lties for businesses that publish misleading ESG data
. In order to encourage AI companies to voluntarily p
ublish ESG-related information and increase their tra
nsparency, it should simultaneously create a strong E
SG disclosure system, integrate it into rules in collab
oration with regulators, and create appropriate incent
ive schemes. In order to improve corporate performa
nce, boost investor confidence, keep investing in inn
ovation, and realize the positive feedback loop of inn
ovation-driven ESG for high-quality development of
platform-based enterprises, businesses should increa
se awareness of ESG concepts and encourage high-q
uality development of businesses. Corporate investor
s should focus on more than just short-term investme
nt returns and the growth of corporate business size
when it comes to high-quality and sustainable develo
pment,but also actively promote and facilitate the ES
G disclosure and institutional construction of platfor
m enterprises, reasonably participate in corporate go
vernance, integrate ESG and other non-financial indi
cators into investment decisions, encourage and supp
ort platform enterprises to continue to innovate, and
pay attention to long-term returns, so as to reduce inv
estment risks. The government ought to assist busine
sses in raising the degree of green technological inno
vation, provide more funding for business resources,
recognize the critical role that green technology inno
vation plays, improve the environment for businesse
A Review of Research on ESG Performance and Corporate Performance of Listed Companies
593
s that engage in green innovation, and encourage inn
ovation. More resource support should be given to en
terprises with voluntary ESG information disclosure
to fully enhance their willingness to participate in en
vironmental governance and promote sustainable dev
elopment. Businesses should focus on ESG-related e
ndeavors and provide more funds to enhance ESG tr
ansparency. To achieve sustainable development in i
ts truest sense, the integration of ESG principles into
the daily production and operational activities of bus
inesses is essential, as it addresses the increasing de
mands of stringent environmental regulations. Gover
nments are called upon to enact policies and to under
take studies that resonate with the practical applicati
on of ESG principles within their respective enterpri
ses. To enhance the understanding of enterprise man
agers regarding the current operational and developm
ental status of their firms, future scholarly endeavors
could amalgamate financial performance, innovatio
n performance, and enterprise value into a comprehe
nsive study. This study would aim to explore the mul
tifaceted impact of digital transformation and ESG p
erformance on enterprise outcomes, as well as to fore
cast the future trajectory of business development. S
uch research endeavors would be instrumental in aidi
ng enterprises in their pursuit of sustainable growth a
nd development.
4 CONCLUSIONS AND
OUTLOOK
In conclusion, it is the influence of ESG performance
on the financial, innovative, and value-related aspec
ts of corporations, along with the consequences of E
SG ratings and the disclosure of ESG information on
business performance, that constitutes the principal f
ocus of scholarly research both within national boun
daries and on a global scale. This domain of study ha
s captured the attention of academics across the worl
d, who are dedicated to examining how ESG metrics
and the transparency thereof impact various dimensi
ons of corporate success and worth. Among these, bu
sinesses that do well in ESG have better financial, in
novative, and enterprise value results; companies wit
h sound ESG rating system have good social reputati
on; companies with more ESG information disclosur
e have higher information transparency and can attra
ct more investors. Issues like knowledge asymmetry
and financing challenges in the corporate market are
likely to result from an inadequate corporate ESG gr
ading system and uneven ESG information disclosur
e rules. Companies with strong corporate governance
, social responsibility, and environmental protection
also do well overall, and the active implementation o
f ESG governance supports long-term company succ
ess. This study identified important gaps in the literat
ure by analyzing the results of other studies on the co
nnection between listed corporations' corporate succ
ess and ESG performance. The data adopted in the e
mpirical analysis of the cited literature are mostly ba
sed on a single industry as the case study object, whi
ch is somewhat one-sided, and the conclusions of the
research can not represent the enterprises in other fie
lds The development of the practice and disclosure o
f the fulfilment of ESG responsibility is a long term
process, and the data used in the cited literature are l
ess than ten years, which is a short time span. The da
ta used in the empirical analysis of the cited literatur
e is less than ten years, and the time span is short, wh
ich fails to form more convincing long-term research
results, so the analysis conclusions and the actual sit
uation also have limitations, and the research on the
case study enterprises also needs more long-term obs
ervation and research. Existing research on corporate
performance focuses on a single ESG performance,
but should be combined with multi-dimensional thin
king from the perspectives of digital transformation,
artificial intelligence revolution and carbon risk, with
the goal to bring the research's findings more into li
ne with the present climate and to encourage the crea
tion of superior ESG in order to accomplish the susta
inable growth of businesses.
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