ESG Performance and Firm Value: The Moderating Role of Government Subsidy

Abstract

This study examines the moderating effects of government subsidies on the relationship between ESG performance and firm value among Chinese A-share listed manufacturing firms. Balanced panel data from the period 2012 to 2021 is employed, and fixed-effects models are utilized for analysis. The key findings are as follows. First, it is observed that ESG performance has a significantly positive impact on the firm value of Chinese manufacturing firms. This finding suggests that the value generated through the implementation of ESG activities offsets the associated compliance costs, leading to an increase in the firm value of Chinese manufacturing firms. Second, government subsidies play a positively moderating role in the relationship between ESG performance and firm value. In China, government subsidies are found to enhance the impact of ESG on firm value. Third, an analysis of the impact of each dimension of ESG on firm value reveals that, among the three dimensions—environmental, social, and governance—the performance of the environmental and social dimensions has a positive impact on firm value. Furthermore, the moderating role of government subsidies in the relationship between environmental and social dimensions of ESG and firm value indicates that subsidies promote Chinese firms in enhancing firm value through environmental and social responsibility compliance