A Study on the Mechanism of ESG’s Impact on Corporate Value under the Concept of Sustainable Development

Abstract

With the deepening of the concept of sustainable development, the academic community has paid more and more attention to how enterprises can achieve value co-creation for multiple stakeholders from the perspective of corporate innovation. ESG is a new concept concerned with how to achieve sustainable development in enterprises in terms of environment, society, and corporate governance. However, there is still a lack of research on how to reshape the innovation processes of enterprises based on the new concept of sustainability and bring competitive value to corporate value. Based on this, we took the listed companies on the main board of the Shanghai and Shenzhen A-shares from 2010 to 2020 as the research object and empirically tested the impact effect of corporate ESG on corporate value, as well as the mediating effect of corporate innovation between corporate ESG and corporate value. At the same time, the institutional environment was incorporated as a moderating variable to further explore its influence mechanism. Finally, the heterogeneity of corporate ESG on corporate value was analyzed at both an enterprise level and a regional level. The results show that corporate ESG and its three sub-dimensions can significantly improve corporate value and innovation level; the internal mechanism shows that corporate innovation plays a mediating role between corporate ESG and its three sub-dimensions, while institutional environment play a moderating effect; non-state-owned enterprises’ ESG has a higher impact on corporate value than state-owned enterprises, especially in eastern China, where the value enhancement effect of ESG is more significant.

1. Introduction

ESG, an initialism for environmental, social, and governance, is an investment philosophy that considers company performance in these areas when making investment decisions. It expands on the concept of responsible investment. In today’s global economy, there is a consensus on the development concept of “innovation, coordination, green, openness, and sharing”. Enterprises, as micro-entities, have taken on the responsibility of achieving sustainable economic development and strive to meet this goal. The COVID-19 pandemic has highlighted the importance of protecting the interests of all stakeholders while effectively implementing ESG to enhance company value. ESG factors, alongside financial considerations, play a crucial role in green investment and have gained international attention due to climate change and environmental concerns. It is projected that sustainable investment will reach USD 5–7 trillion by 2030, offering significant business opportunities for global financial institutions and enterprises while supporting sustainable development. The country is actively promoting green development and aims to establish a global green financial center, accompanied by strengthened regulations in the green finance market to safeguard investors and consumers. Green finance represents a pivotal trend in the sustainable development of the global economy and the establishment of a new, green development system. Companies should embrace green development, consider the impact of ESG factors on corporate value, and actively promote green finance and ESG investment to enhance long-term competitiveness. The Chinese government has implemented policies and regulations to advance green finance, emphasizing comprehensive implementation. Consumers, with improved living standards, now consider factors like reputation and social responsibility when making purchasing decisions, favoring environmentally friendly companies and those engaged in charitable activities. Incidents of financial fraud have led investors to focus on a company’s social performance and sustainability, moving beyond traditional financial analysis. With these driving factors, companies increasingly prioritize green development and sustainable competitiveness to pursue capital gains. ESG investing, integrating socially responsible investments, has evolved into a significant component of green investing with great importance and status.

ESG in China is rapidly evolving and moving towards maturity. In June 2018, MSCI included Chinese A-shares in its Global Market Index and Emerging Markets Index and imposed stricter requirements on financial reporting and disclosure for listed companies, which has prompted more and more companies to publish financial reports and incorporate financial factors into their daily operations. Through excellent performance and reliable disclosure in the ESG area, listed companies can effectively attract investors and capital, bringing lasting and stable returns and providing them with more opportunities for external financing. The continuous reform of China’s ESG regulators has further improved the ESG disclosure and rating system in a more standardized, compliant, and transparent direction, which has prompted more people to accept, participate in, and comply with the ESG concept, thus making the prospect of ESG development in China brighter.

As the current economic situation and social development continue to change, this paper will delve into how ESG affects the financial statuses of companies and how it promotes corporate innovation, as well as how it regulates corporate value through the institutional environment. The purpose of this paper is to explore in depth the impact of corporate ESG on corporate value from a practical perspective and to propose policy recommendations that will help companies achieve long-term sustainable development, taking into account the characteristics of property rights and the level of geographical development of Chinese companies, in the hope of providing a reference for researchers in other countries.

The established literature focuses on examining the impact of individual dimensions of E, S, or G on corporate value, regarding which there is basically no disagreement that good corporate governance helps to enhance corporate value [1]. However, there is wide divergence regarding the relationship between environmental and social responsibility and corporate value, with positive, negative, and unclear views emerging, among which support for the view that environmental and social responsibility contributes to corporate value is dominant [2]. In recent years, as the concept of ESG as a whole has been gradually accepted by the community, some scholars have started to examine the impact of overall corporate ESG performance on corporate value, and the vast majority of studies have found that ESG helps to improve corporate value [3,4,5]. The aforementioned literature provides useful references for understanding the relationship between ESG performance and corporate value, but most of the relevant literature does not examine the mechanism of ESG’s impact on corporate value in depth, and there are certain missing links in the logical chain [6,7]. In view of this, we carried out certain work-in-progress additions to the research, hoping to help relevant researchers.

The main contributions of this paper are as follows: (1) On the theoretical level, the existing literature mainly studied the relationship between ESG performance and corporate value and has not reached a consistent conclusion [8,9]. The research results of this paper show that ESG performance helps to improve corporate value and clarify the controversy between corporate ESG and corporate value based on the mediating mechanism of corporate innovation, which helps to deepen the understanding of the relationship between corporate ESG performance and corporate value. Unlike the general research on the relationship between corporate social responsibility and corporate value, this paper examines the mediating role of corporate innovation and the moderating role of institutional environment in the relationship between ESG performance and its three dimensions and corporate value, respectively, by assessing the three dimensions and comprehensive dimension of ESG. This will help the academic community to re-examine the heterogeneous impact effect and internal mechanism of the three different dimensions as they apply to corporate value. (2) On the practical level, based on the ESG framework system, we studied the impact of corporate ESG performance and its three dimensions on corporate value, deepening the cognition of ESG performance’s value creation function for companies based on sustainable development orientation and providing empirical evidence support for listed companies to pay attention to in order to improve their ESG performance and enhance their innovation ability.

2. Theoretical Analysis and Research Hypotheses

2.1. Theoretical Basis

2.1.1. Stakeholder Theory

In 1959, Penrose proposed the idea that “a firm is a collection of human assets and interpersonal relations”, which is considered the basis of stakeholder theory [10]. According to a study by the Stanford Research Institute, stakeholders play a vital role in some organizations; without their participation and contribution, these organizations would face the risk of extinction. Freeman argued that stakeholders can not only provide significant decision support for firms but also support them in achieving their established business goals, thus making them more influential [11]. Over time, this definition has become more widely applied.

Although the internal employees of a firm do not participate in its daily operations, they can still obtain useful information from various forms, including its financial statements, ESG reports, social responsibility reports, etc., to better understand its development status. Each stakeholder has its own unique needs. Firms should develop effective strategies and tactics to timely detect and identify potential risks when considering ESG; government departments should have a deep understanding of the ESG development status of firms in various industries and fully consider the industry differences, to ensure that firms can strictly comply with the national policies and regulations and strengthen supervision; investors and shareholders should confirm whether firms comply with the national laws and regulations, to provide strong support for future investment decisions and ensure their legality and sustainability; community residents’ attention to the ESG measures taken by firms cannot be ignored, as they are concerned about the adverse impacts of these measures on the environment and their lives. In order to ensure the long-term development of firms, researchers must comprehensively consider the needs, costs, benefits, risks, and other factors affecting all stakeholders and take appropriate measures to implement information disclosure. This can meet the requirements of all stakeholders and bring about better financial conditions for firms.

2.1.2. Stakeholder Theory, Principal–Agent Theory

In the 1930s, Berle and Means found that there were many defects in integrated management, and they proposed the idea of separating ownership and control to improve this situation. The owners of firms should hire a professional management team to manage the daily operations of the firm, while also ensuring that they have control over the future development of the firm. Thus, a cooperative relationship of delegation and agency was formed [12]. Due to the differences in the purposes of the two parties, managers may take improper means to obtain personal gains, thus damaging the interests of the firm, resulting in agency disputes. In the 1970s, in order to reduce profit losses and ease the burden of incentive and supervision for owners, scholars proposed the agency theory, hoping to achieve better results. The core concept of this theory is to design an optimal incentive mechanism to encourage agents to contribute as much as possible to the firm, achieve the firm’s goals, minimize conflicts of interest, reduce the costs of agents, and protect the interests of the firm. To achieve this goal, firms must design the best system to restrict, monitor, control, and regulate the business decisions of agents and avoid incorrect or irresponsible behaviors; and adopt effective incentive measures to encourage managers to improve their abilities and actively participate in the firm’s development, to achieve a win–win situation, let both parties reach a consensus on their goals, and achieve the optimal profit distribution. The delegation–agency relationship aims to help both parties achieve a common goal: that is, to obtain higher returns, more profits, greater value, and more wealth accumulation, while agents are committed to providing higher compensation, better reputation, and career development. Because the desires of the two people are completely opposite, their conflicts of interest become obvious. Without an effective system framework, agents will face the risk of not being effectively supervised and constrained, which may lead them to take improper actions. Agents sometimes abuse their power and try to obtain their own interests, but this behavior often sacrifices the legitimate rights and interests of principals. ESG investment managers have great decision-making power and strong subjectivity. The large amount of ESG investment may be for the purpose of improving corporate image or covering up internal deficiencies. Sacrificing corporate development opportunities and competitive advantages for self-interest will obviously lead to tension in agency relations, resulting in a sharp increase in agency costs and ultimately endangering the overall interests of firms.

2.1.3. Signal Transmission Theory

According to the signaling theory, when one party has enough information, it will actively communicate it to the other party and take corresponding actions, thus sending out signals. Due to the gap in information capabilities between the two parties, the one with more information often tries to use it to enhance its competitiveness, thus achieving the best trading effect. If the signal is beneficial to the sender, it is called a beneficial signal; otherwise, it is an adverse signal. With the increasing competition in China’s capital market, firms often have a lot of personal information, such as financial status and profitability, but due to various constraints, they have difficulty obtaining these important secrets or information. The asymmetry of information makes it impossible for both parties to achieve the most ideal trade results. On the other hand, firms should strive to provide sufficient funds, excellent employees, reliable procurement channels, and good operational conditions for all stakeholders. However, due to the lack of information, outsiders have difficulty determining which firms are worth supporting and which are trustworthy. In order to let stakeholders better understand the situations of firms, firms should actively send out beneficial information and communicate with the outside world. By taking positive social responsibility actions, firms can gain positive influence. A dynamic and responsible firm will stand out in the competition and surpass other firms.

According to the principle of signal transmission, investors should collect as much useful information as possible in order to make wise decisions. Nevertheless, firms have an information advantage, and they can provide investors with the information they want. On the other hand, by disclosing ESG data, investors can more easily access relevant information, enhance transparency, and avoid the risks of information asymmetry. ESG performance can show that a firm attaches great importance to the interests of stakeholders and will do its best to reward their contributions. ESG excellence can not only improve the social image of firms, but also bring them lasting success. However, the current ESG disclosure standards are not perfect yet, which means that firms may tend to provide beneficial information and ignore potential risks, resulting in information inequality. In addition to complying with national policies, firms should also take measures to improve their environmental, social and governance levels, in order to achieve greater development. For example, in terms of environmental protection, firms should increase investment to reduce the negative impact on the economy.

2.2. Research Hypothesis

2.2.1. ESG Performance and Corporate Value

ESG performance in a firm is influenced by several factors, including environmental, social, and corporate governance. By assessing the environmental performance of companies, it can be determined whether they are taking effective environmental measures and how they are continuously improving pollution control and resource use efficiency, which can help companies gain a competitive advantage. Companies should pay attention to strengthening the relationship management among stakeholders in order to provide maximum support and assistance to all parties, thus maximizing multiple integrated values. The management of the enterprise can be considered from both internal management and external management [13]. A series of effective measures are taken to establish a harmonious corporate environment in order to ensure that the rights and interests of the company and all its stakeholders are effectively protected. Through excellent ESG performance, the company’s financial position has been significantly improved [14].

With the promotion of the concept of sustainable development, the construction of ecological civilization has become an important part of the national development strategy; therefore, companies’ active commitment to environmental responsibility will help improve their corporate value. The principal-agent theory points out that there is an information asymmetry problem in the relationship between enterprises and their various stakeholders. Under the current environmental situation, enterprises taking up environmental responsibility can not only reduce the pressure of external stakeholders on their environmental control and regulation, but also from a signaling perspective, the active participation of enterprises can gain the recognition and support of all parties, thus improving the legitimacy of enterprises and ultimately achieving their financial goals. According to resource-based theory, by investing more in environmental management and environmental technologies, companies can not only gain a larger market share, but also effectively promote their sustainable development and help to improve their economic efficiency [15].

By shouldering social responsibility, companies will help improve their social image, which will contribute to the continuous improvement of their financial situation. According to the stakeholder theory, the fulfillment of social responsibility by companies can significantly improve their social capital and their organizational compliance, and can effectively protect them against possible future risks, thus significantly improving their financial position. According to information dissemination theory, corporate social responsibility can promote openness and transparency, reduce information asymmetry between companies and other stakeholders, and allow all stakeholders to clearly understand the company’s operating conditions and future development trends, which can reduce the risk of adverse selection and enhance long-term cooperation between the two parties, ultimately leading to sustainable corporate development [16].

In today’s economic environment, the implementation of the separation of powers system is essential to enhance corporate governance and improve the financial situation of enterprises, in which the existence of principal-agent has a profound impact on the transaction costs and corporate value of enterprises. With the help of principal-agent theory, a good corporate governance structure can significantly reduce the operating costs of a company, discourage the speculative mentality of executives, and allow more flexibility to respond to market changes, thus significantly improving the business performance of the company [17]. Corporate governance is a key factor for sustainable corporate development, helping to eliminate agency behavior and promote information sharing, thereby driving companies to achieve their long-term goals and ultimately improve their corporate value. Excellent corporate governance not only provides strong institutional support for long-term corporate development, but also effectively safeguards the interests of all parties, thereby maximizing comprehensive value in multiple ways. Therefore, this paper proposes the following research hypotheses:

H1a: 

A firm’s environmental performance (E) has a significant, positive effect on its corporate value.

H1b: 

A firm’s social performance (S) has a significant, positive effect on its corporate value.

H1c: 

A firm’s corporate governance (G) has a significant, positive effect on corporate value.

H1d: 

The performance of ESG of a firm has a significant, positive effect on its corporate value.

2.2.2. ESG Performance and Corporate Innovation

Corporate innovation is a determining factor in the direction, speed and scale of a company’s growth. This area involves many different factors, such as organization, technology, product, management and strategy, and is very important for companies. Business innovation is not limited to technology, but also entails re-structuring production resources and environments to achieve more efficient operations. By continuously innovating products and technologies, companies provide a strong support for improving ESG performance. By improving ESG performance, firms can be more effective in stimulating innovation and are more motivated to achieve their goals [18,19].

With the changing external environment and the increasing demands of society on companies, companies must continuously improve their business models to meet the needs of the market and to be able to better adapt to the market development. Therefore, companies should actively promote technological innovation and increase their control over the environment in order to achieve better environmental performance. In order to protect the environment in which they operate, companies will adopt green technology innovation, product innovation and other measures to reduce pollution in the production process and effectively reduce waste in the final output. Through this environmental improvement, the company’s social reputation and brand image are significantly enhanced, while also providing strong support for its innovative development. High-quality environmental conditions can greatly reduce the financing cost of enterprises, alleviate the pressure of financing, provide more financial support for enterprise innovation, increase investment, and promote technological innovation and product innovation, thus enhancing the innovation capability of enterprises [20,21].

Enterprises undertaking social responsibility can establish good cooperative relationships, provide more resources and support for enterprises, and thus promote their innovation development. According to stakeholder theory, by taking social responsibility, enterprises can establish closer and more reliable cooperative relationships with investors and other parties. With the cross-border knowledge network established with stakeholders, enterprises can obtain rich innovation information and thus promote their innovation capability. According to signal propagation theory, the implementation of “information effects” can reduce information asymmetry, agency relationships, and financing constraints, which will provide firms with more financial support to reduce their burden in the innovation field and facilitate their development [18,22].

The effectiveness of corporate governance is crucial to promote corporate innovation, and therefore, good corporate governance is widely considered to be a key factor in driving corporate development [23]. Although corporate innovation plays an important role in capturing revenue, its high risk and long time cycle often lead managers to abandon their commitment to it, thus making technological innovation overly optimistic. Through effective incentives and constraints, good corporate governance helps mitigate principal-agent conflicts and encourages managers to focus on corporate innovation and increase their investment in R&D and innovation to ensure stable long-term corporate growth. Therefore, this paper proposes the following research hypotheses:

H2a: 

A firm’s environmental performance (E) has a significant, positive effect on its innovation.

H2b: 

A firm’s social performance (S) has a significant, positive effect on its innovation.

H2c: 

A firm’s corporate governance (G) has a significant, positive effect on its innovation.

H2d: 

A firm’s ESG performance has a significant, positive effect on its innovation.

2.2.3. ESG Performance, Corporate Innovation, and Corporate Value

Corporate ESG can be effective in enhancing corporate innovation and corporate value, so how can corporate innovation influence this? According to the theory of external pressure, various stakeholders put different levels of environmental pressure on companies as a way to promote their development, and in the process of achieving their innovation capabilities and corporate value, companies should take the initiative to assume their own environmental obligations. By promoting the application of green technologies, especially the development of products and technologies that are energy-efficient, low-carbon and environmentally friendly, will become a key strategy for companies to achieve sustainable development. By adopting green innovation measures, enterprises can effectively reduce the pollution of natural resources and enhance the uniqueness of their products, thus achieving the dual goals of saving resources and improving economic conditions. According to Porter’s hypothesis, reasonable environmental controls help to promote green production and help to increase their investment in environmentally friendly technologies to maximize innovation. In addition, these inputs can help reduce or completely offset the costs to the firm. Therefore, companies should actively take on environmental responsibility in order to drive green innovation and achieve sustainable growth by continuously improving their products and technologies and enhancing their corporate value [24,25,26].

In terms of corporate social performance, innovation and corporate value, corporate investment in social responsibility helps drive product and process innovation, which in turn improves corporate value. By fulfilling social responsibility, enterprises can build complex and extensive relationship networks, thus facilitating knowledge exchange and sharing with external stakeholders, as advocated by stakeholder and social network theory. With the continuous influx of external knowledge, enterprises can better build their own knowledge structure, activate innovative thinking, and can access social resources from various parties to further improve the results of technological innovation, ultimately realizing the competitiveness of enterprises and bringing them considerable economic benefits [27,28]. According to signaling theory, the active environmental responsibility of enterprises can alleviate the information asymmetry between enterprises and stakeholders and thus generate positive information effects. Through this behavior, enterprises can gain trust and support from stakeholders, which can lead to financial and technological support for sustainable development and enhance the value of enterprises. Thus, by improving corporate innovation, firms can enhance the effectiveness of their social responsibility fulfillment and gain opportunities to improve their corporate value from it [22].

By improving corporate governance, not only can we promote corporate innovation and maximize value, but also lay a solid foundation for its long-term stable development, so that we can more effectively achieve corporate business performance. Management’s decision making is a key factor in driving corporate innovation, and it can help companies better utilize and integrate their internal resources to achieve the best resource allocation. With strict supervision, management’s innovation investment behavior is effectively controlled, which not only reduces opportunistic and short-sighted behavior, but also provides a perfect resource allocation mechanism for enterprises to select the most promising projects according to their long-term development needs in order to realize their strategic positioning and ultimately achieve corporate innovation. According to the resource-based theory, innovation in enterprises can greatly improve the efficiency of the use of existing resources and can combine these resources effectively to bring unique competitive advantages to enterprises. Thus, innovation is critical for firms to help them gain market competitiveness and improve performance. Therefore, this paper proposes the following research hypotheses:

H3a: 

Corporate innovation acts as a mediating bridge in the relationship between environmental performance (E) and corporate value.

H3b: 

Corporate innovation acts as a mediating bridge in the relationship between social performance (S) and corporate value.

H3c: 

Corporate innovation acts as a mediating bridge in the relationship between corporate governance (G) and corporate value.

H3d: 

Corporate innovation acts as a mediating bridge in the relationship between corporate ESG and corporate value.

2.2.4. ESG Performance, Institutional Environment, and Corporate Value

The institutional environment provides firms with comparative advantages, but to some extent it also constrains the range of choices available to corporate managers. Omran et al. argue that shareholder returns are not significantly different under stakeholder orientation and shareholder orientation [29]. McWilliams et al. point out that the profitability of firms that fulfill social responsibility is the same as those that do not [30]. As the institutional environment changes, the public will pay more attention to corporate ESG practices. With the same profitability, corporate ESG practices pay costs, and these costs create benefits for both the firm and society. Due to the externality of resource investment in environmental and social dimensions, other stakeholders are also enjoying the results of corporate ESG practices indirectly, thus increasing the non-economic benefits to stakeholders. In addition, the institutional environment affects CSR fulfillment [31], and the improvement of the institutional environment can facilitate CSR fulfillment and improve performance [32,33]. There are differences in corporate ESG practices and corporate value in different institutional environments, based on which Hypothesis 4 is proposed:

H4: 

There are differences in the impact of ESG performance on corporate value across institutional environments.

3. Research Design

3.1. Sample Selection and Data Sources

This study mainly selected the A-share main-board-listed companies in China’s Shanghai and Shenzhen Stock Exchanges from 2010 to 2020 as the initial research sample, excluding financial-insurance-listed companies and listed companies with debt-to-asset ratios exceeding one and deleting listed companies with more missing values of variables. Finally, 1981 enterprises and 11,699 research samples were obtained.

The data regarding enterprise environment and corporate social responsibility were obtained from the Hexun.com corporate social responsibility report; the data regarding enterprise innovation were obtained from the CNRDS database; the data regarding industry classification were obtained from the CCER database; and the rest of the data were obtained from the Guotai’an database. In order to solve the interference of extreme values, we performed 1% tail shrinkage on the variables, and the data processing process was completed using Python3.7 and Stata16.

3.2. Model Setting and Variable Definition

3.2.1. Model Setting

This study set up Regression Models (1) to (5), which were used to test Research Hypotheses 1 to 3. The specific regression model settings were as follows:

$$\begin{array}{c}RO{A}_{it}={\beta }_0+{\beta }_{1}ES{G}_{it}+{\beta }_i \mathit{Control} l_i+{\epsilon }_{it}\end{array}$$

(1)

$$\begin{array}{c}{ \mathit{Innova}}_{it}={\beta }_0+{\beta }_{1}ES{G}_{it}+{\beta }_i \mathit{Control} l_{it}+{\epsilon }_{it}\end{array}$$

(2)

$$\begin{array}{c}{ \mathit{ROA} }_{it}={\beta }_0+{\beta }_{1}ES{G}_{it}+{\beta }_2{ \mathit{Innova}}_{it}+{\beta }_i \mathit{Control} l_{it}+{\epsilon }_{it}\end{array}$$

(3)

$$\begin{array}{c}{ \mathit{ROA} }_{it}={\beta }_0+{\beta }_{1}ES{G}_{it}+{\beta }_2{ \mathit{MI}}_{it}+{\beta }_i \mathit{Control} l_{it}+{\epsilon }_{it}\end{array}$$

(4)

$$\begin{array}{c}{ \mathit{ROA} }_{it}={\beta }_0+{\beta }_{1}ES{G}_{it}+{\beta }_2{ \mathit{MI}}_{it}+{\beta }_3{ \mathit{ESG}}_{it} \ast { \mathit{MI}}_{it}+{\beta }_i \mathit{Control} l_{it}+{\epsilon }_{it}\end{array}$$

(5)

In Regression Models (1) and (5), the dependent variable is corporate value and the explanatory variable is ESG performance, which reflects the performance of enterprises in terms of environment, society, and corporate governance; enterprise innovation is the dependent variable of Regression Model (2) and the mediating variable of Regression Model (3). MI is the moderating variable in all models. The control variables in regression models (1) to (5) are debt-to-asset ratio (Lev), cash ratio (Cash), fixed asset ratio (PPE), intangible asset ratio (INTAN), enterprise growth (Growth), industry nature (Industry), and time effect (Year).

3.2.2. Variable Definitions

(1) Dependent variable: corporate value (ROA). ROA, also known as return on assets or asset return ratio, is an indicator that measures how much net profit each unit of an asset generates. It measures the profit generated by each dollar of an asset. The variables commonly used to measure corporate value are mainly Tobin Q and ROA. Return on assets (ROA) measures the book value of the enterprise, while Tobin Q measures the market value of the enterprise. This study adopted the net profit rate of total assets, which is widely used by scholars to measure enterprise when studying the relationship between enterprise ESG and corporate value [9,34]. Of course, choosing ROA also has certain limitations, and subsequent research can use Tobin Q for supplement and replacement.

(2) Explanatory variable: enterprise ESG (ESG). Considering that the ESG data of the Bloomberg database is difficult to obtain, this study built ESG variables by itself, hoping to give other scholars a reference idea. ① This study used the environmental responsibility score of the Hexun.com corporate social responsibility report rating to measure the environmental performance of enterprises. ② We used the social responsibility score of the Hexun.com corporate social responsibility report rating to measure the social responsibility of enterprises. ③ We drew on the methods used by Qiu Muyuan et al., Zhang Huili et al., and Bai Zhongen et al. in constructing a corporate governance index to measure corporate governance. This study used principal component analysis to construct a corporate governance index to measure the corporate governance performance of enterprises. The arithmetic average of enterprise environment, social responsibility, and corporate governance was used to measure enterprise ESG [35,36,37].

(3) Mediating variable: Enterprise innovation capability (Innova). Scholars at home and abroad generally use innovation input and output to measure the innovation capability of enterprises. The measurement of innovation input generally adopts R&D expenditure [38]; the measurement of innovation output generally adopts the number of patent applications of enterprises [39], and some also adopt the output value of new products of enterprises [40]. This paper measures the innovation capability of enterprises based on the number of patent applications of enterprises.

(4) Moderating variable: institutional environment (MI). The institutional environment was measured by the overall marketization index constructed in the China Sub-Provincial Marketization Index Report (2021), which measures the specific market environment in five areas: government–market relationship, development of the non-state economy, development of product markets, development of factor markets, development of market intermediary organizations, and rule of law environment [41].

(5) Control variables. Referring to the relevant research of Zhang Lin et al. [42] and Sun Dong et al. [43], when estimating the regression model, we controlled the asset–liability ratio, cash ratio, fixed asset ratio, intangible asset ratio, enterprise growth, industry effect, and time effect. The descriptions and specific measurements of all variables are shown in

Table 1. Variable definitions.

Variable Type	Variable Name	Symbol	Variable Measurement
Dependent variable	Corporate value	ROA	Ratio of net profit to average total assets
Explanatory variable	ESG	ENV	Environmental responsibility score, from the Hexun.com corporate social responsibility report rating
		SOC	Social responsibility score, from the Hexun.com corporate social responsibility report rating
		GOV	Corporate governance score, calculated by principal component analysis
		ESG	Arithmetic average of environmental performance, social performance, and corporate governance scores
Mediating variable	Enterprise innovation	Innova	The natural logarithm of the total number of applications for invention, utility model, and design patents plus one
Moderating variable	Institutional environment	MI	Marketability index of the place where the company is registered
Control variable	Asset–liability ratio	Lev	The ratio of total liabilities to total assets
	Cash ratio	Cash	Net cash flow from operating activities/total assets
	Fixed asset ratio	FAR	The ratio of fixed assets to total assets
	Intangible asset ratio	IAR	The ratio of intangible assets to total assets
	Enterprise growth	Growth	Revenue growth rate, i.e., (current revenue—previous revenue)/previous revenue
	Industry effect	Industry	Industry dummy variable, assigned as one if it belongs to that industry; otherwise assigned as zero
	Time effect	Year	Yearly dummy variable, assigned as one if it belongs to that year; otherwise assigned to zero

.

4. Empirical Analysis

4.1. Descriptive Statistical Analysis

As shown in

Table 2. Descriptive statistical analysis.

Variable	Sample Size	Mean	Std	Min	Mid	Max
ROA	11,699	0.0479	0.0474	−0.1458	0.0423	0.2139
ENV	11,699	1.5096	4.8189	0.0000	0.0000	23.0000
SOC	11,699	3.1676	2.4532	−10.0000	3.3500	6.8800
GOV	11,699	−0.7988	14.2647	−27.2825	−2.4240	39.4072
ESG	11,699	1.2928	5.1853	−8.5953	0.7315	16.4364
Innova	11,699	2.9738	1.6555	0.0000	3.0910	7.2876
MI	11,699	8.4592	1.8050	3.8600	8.7500	11.5026
Lev	11,699	0.4172	0.1822	0.0603	0.4140	0.8552
Cash	11,699	0.6747	0.8876	0.0301	0.3746	7.4802
FAR	11,699	0.2353	0.1493	0.0055	0.2071	0.7013
IAR	11,699	0.0476	0.0432	0.0000	0.0372	0.3550
Growth	11,699	0.1456	0.2653	−0.4972	0.1085	1.9111

, by analyzing the corporate value variable (ROA), we found that its mean and median are both high, and the standard deviation is also large, which indicates that there are significant differences in the corporate value of the sample companies. The research results show that the mean and median of the enterprise environmental performance variable (ENV) are both higher than 1.5096, while the standard deviation reaches 4.8189, which indicates that there are significant differences in the environmental performance of the sample companies; the mean and median of social performance (SOC) are 3.1676 and 3.35, respectively. While the standard deviation reaches 2.4532, which indicates that there are significant differences in the social performance of the sample companies, the mean and median of the governance performance variable (GOV) show significant changes, with a mean of −0.7988 and a median of −2.4240. After statistical analysis, the standard deviation is as high as 14.2647, which indicates that there are significant differences in the corporate governance of the sample companies; after statistical analysis, the mean value of enterprise ESG variables reaches 1.2928, while the standard deviation reaches 5.1853, which indicates that there are significant differences in ESG among different enterprises. The research found that the mean and median of the enterprise innovation variable (Innova) are higher than other variables, with a mean of 2.9738 and a median of 3.0910, while the standard deviation is 1.6555, all of which indicates that there are significant differences in the innovation of the sample companies. After analysis, we found that the standard deviation of the control variables is large, which indicates that there are significant differences in their observed values among different sample companies, which may have an impact on corporate value.

In this section, we explore the relationship between each research variable in detail through Pearson correlation analysis and summarize the results presented in

Table 3. Correlation analysis.

	ROA	ENV	SOC	GOV	ESG	Innova	MI
ROA	1
ENV	0.014	1
SOC	0.300 ***	0.060 ***	1
GOV	0.073 ***	0.037 ***	0.039 ***	1
ESG	0.118 ***	0.353 ***	0.212 ***	0.935 ***	1
Innova	0.070 ***	0.074 ***	0.017 *	−0.027 ***	0.001	1
MI	0.084 ***	−0.128 ***	−0.004	0.001	−0.040 ***	0.120 ***	1

Note: * p < 0.1, *** p < 0.01

. Due to the large number of variables, we only show the correlation of the main variables here. Through an in-depth analysis of Table 3, we find that: (1) The correlation between ESG and ROA is at a normal level and has a significant positive impact, which indicates that we need to explore their relationship more deeply. (2) There is a positive correlation between corporate value (ROA) and enterprise innovation (Innova), and it is significant at the 1% significance level. Enterprise ESG is positively correlated with innovation, but not significantly. This indicates that the improvement of enterprise ESG level will have a certain positive impact on enterprise innovation level, but the specific effect needs further study. (3) After analysis, the degree of mutual influence between corporate value and other important factors is within an acceptable range and has a 1% statistical significance.

4.2. Multivariate Regression Analysis

4.2.1. The Impact of ESG Performance on Corporate Value

Based on the relevance analysis results, we applied Model (1) to test the effect of ESG performance on corporate value and to investigate its impact mechanism in depth. The experimental results are shown in

Table 4. Test results regarding ESG’s effect on corporate value.

Variable	ROA
	(1)	(2)	(3)	(4)
ENV	0.0005 ***
	(6.45)
SOC		0.0050 ***
		(31.19)
GOV			0.0003 ***
			(10.37)
ESG				0.0013 ***
				(16.61)
Lev	−0.0973 ***	−0.0897 ***	−0.0967 ***	−0.0977 ***
	(−35.45)	(−34.42)	(−35.45)	(−36.06)
Cash	0.0024 ***	0.0023 ***	0.0021 ***	0.0019 ***
	(3.90)	(3.93)	(3.41)	(3.21)
FAR	−0.0263 ***	−0.0259 ***	−0.0266 ***	−0.0271 ***
	(−9.19)	(−9.39)	(−9.34)	(−9.56)
IAR	−0.0410 ***	−0.0476 ***	−0.0416 ***	−0.0418 ***
	(−4.47)	(−5.42)	(−4.60)	(−4.68)
Growth	0.0463 ***	0.0422 ***	0.0464 ***	0.0461 ***
	(24.92)	(23.90)	(24.96)	(24.99)
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0868 ***	0.0803 ***	0.0881 ***	0.0863 ***
	(18.19)	(16.90)	(18.58)	(18.18)
N	11,699	11,699	11,699	11,699
R2	0.2417	0.3038	0.2465	0.2575
F	101.7141	132.3064	104.0627	109.9836

Note: *** p < 0.01; the values in parentheses are t-values, using robust standard errors

. Through regression analysis, we found that the changes in corporate environmental performance had a significant impact on corporate value. Our estimated coefficient was 1%, indicating that the higher the environmental performance, the higher the firm performance, which was in line with Hypothesis 1a. By investing heavily in environmental management, the enterprises improved their operational efficiency and reduced their investment risk, resulting in a significant increase in corporate value. Through regression analysis, the confidence level of the corporate social performance variable (SOC) was 1%, indicating that the higher the social performance, the higher the corporate value, which strongly verified Hypothesis 1b. After further analysis, we confirmed the findings of Gossand Roberts [44]. We also found that the regression estimation coefficient of the corporate governance variable (GOV) was significantly positive and reached a confidence level of 1%, indicating that the improvement of corporate governance level could effectively enhance corporate value, which strongly verified Hypothesis 1c. We also found that the regression estimation coefficient of the corporate ESG variable (ESG) had a high level of reliability and reached a confidence level of 1%, indicating that the improvement of ESG would help to enhance corporate value, which strongly supported Hypothesis 1d. This result was consistent with the views of Velte, Miralles-Quiros et al., and other literature, in that corporate ESG had a value enhancement effect rather than a shareholder cost effect. Therefore, Research Hypotheses 1a–1d were all supported [34,45].

4.2.2. The Impact of ESG on Corporate Innovation

To test the effect of ESG on innovation capability, we used the multiple linear regression method to estimate Model (2) and obtained the test results displayed in

Table 5. Test results regarding ESG’s effect on enterprise innovation.

	(1)	(2)	(3)	(4)
Variable	Innova	Innova	Innova	Innova
ENV	0.0403 ***
	(13.06)
SOC		0.0261 ***
		(4.53)
GOV			0.0040 ***
			(3.93)
ESG				0.0236 ***
				(8.34)
Innova
Lev	1.7658 ***	1.9061 ***	1.8624 ***	1.8401 ***
	(18.59)	(20.01)	(19.50)	(19.31)
Cash	−0.0406 **	−0.0417 **	−0.0453 **	−0.0490 ***
	(−2.28)	(−2.36)	(−2.56)	(−2.76)
FAR	−1.7832 ***	−1.7639 ***	−1.7725 ***	−1.7829 ***
	(−17.35)	(−16.99)	(−17.09)	(−17.25)
IAR	0.0604	−0.0113	0.0184	0.0143
	(0.18)	(−0.03)	(0.05)	(0.04)
Growth	0.1451 ***	0.1247 **	0.1478 ***	0.1429 ***
	(2.75)	(2.33)	(2.77)	(2.69)
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.4764 ***	0.5406 ***	0.5816 ***	0.5492 ***
	(3.16)	(3.61)	(3.86)	(3.63)
N	11,699	11,699	11,699	11,699
R2	0.2673	0.2569	0.2566	0.2604
F	144.1491	140.1235	137.7479	139.4004

Note: ** p < 0.05, *** p < 0.01; the values in parentheses are t-values, using robust standard errors

. We found that the regression coefficient of the environmental performance variable (ENV) was positive at the 1% confidence level, indicating that the higher the environmental performance, the stronger the innovation capability. This was in line with Hypothesis 2a. Based on the regression analysis in the second column of Table 5, the regression coefficient of SOC had a confidence level of 1%, indicating that the higher the social performance, the stronger the innovation capability, which confirmed Hypothesis 2b. We also found that the regression coefficient of the corporate governance variable (GOV) was positively related to the innovation capability. This was based on a confidence level of 1%, supporting Hypothesis 2c. We also found that the regression analysis in the fourth column showed that the regression coefficient of the corporate ESG variable (ESG) had a reliability of 1%, indicating that the higher the ESG, the stronger the innovation capability. This verified Hypothesis 2d. Through systematic tests, we found that ESG had a crucial role in enhancing innovation capability, which not only satisfied the practical needs of enterprises, but also provided them with effective incentives and institutional safeguards.

4.2.3. The Relationship between ESG and Corporate Value in the Context of Corporate Innovation

We conducted a thorough analysis and found that a good work environment can greatly enhance a firm’s performance and innovation capability. Therefore, how does the innovation capability of the enterprise affect its market situation and financial quality? We used the mediation effect test procedure developed by Wen Zhonglin et al. (2004) to examine how the innovation capability of an enterprise influences the relationship between its external environmental factors and its internal value. The test results are shown in

Table 6. Test results regarding the mediating effect of enterprise innovation on the relationship between ESG and corporate value.

	(1)	(2)	(3)	(4)	(5)	(6)
Variable	ROA	Innova	ROA	ROA	Innova	ROA
ENV	0.0005 ***	0.0403 ***	0.0003 ***
	(6.45)	(13.06)	(4.36)
SOC				0.0050 ***	0.0261 ***	0.0049 ***
				(31.19)	(4.53)	(30.73)
GOV
ESG
Innova			0.0042 ***			0.0040 ***
			(15.80)			(15.69)
Lev	−0.0973 ***	1.7658 ***	−0.1047 ***	−0.0897 ***	1.9061 ***	−0.0974 ***
	(−35.45)	(18.59)	(−37.73)	(−34.42)	(20.01)	(−36.79)
Cash	0.0024 ***	−0.0406 **	0.0025 ***	0.0023 ***	−0.0417 **	0.0025 ***
	(3.90)	(−2.28)	(4.19)	(3.93)	(−2.36)	(4.23)
FAR	−0.0263 ***	−1.7832 ***	−0.0188 ***	−0.0259 ***	−1.7639 ***	−0.0188 ***
	(−9.19)	(−17.35)	(−6.57)	(−9.39)	(−16.99)	(−6.87)
IAR	−0.0410 ***	0.0604	−0.0412 ***	−0.0476 ***	−0.0113	−0.0476 ***
	(−4.47)	(0.18)	(−4.48)	(−5.42)	(−0.03)	(−5.37)
Growth	0.0463 ***	0.1451 ***	0.0456 ***	0.0422 ***	0.1247 **	0.0417 ***
	(24.92)	(2.75)	(24.89)	(23.90)	(2.33)	(23.88)
Industry/Year	Yes	Yes	Yes	Yes	Yes	Yes
Cons	0.0868 ***	0.4764 ***	0.0847 ***	0.0803 ***	0.5406 ***	0.0781 ***
	(18.19)	(3.16)	(17.72)	(16.90)	(3.61)	(16.40)
N	11,699	11,699	11,699	11,699	11,699	11,699
R2	0.2417	0.2673	0.2578	0.3038	0.2569	0.3184
F	101.7141	144.1491	105.1883	132.3064	140.1235	134.7676
	(7)	(8)	(9)	(10)	(11)	(12)
Variable	ROA	Innova	ROA	ROA	Innova	ROA
ENV
SOC
GOV	0.0003 ***	0.0040 ***	0.0003 ***
	(10.37)	(3.93)	(9.88)
ESG				0.0013 ***	0.0236 ***	0.0012 ***
				(16.61)	(8.34)	(15.52)
Innova			0.0043 ***			0.0040 ***
			(16.09)			(15.29)
Lev	−0.0967 ***	1.8624 ***	−0.1047 ***	−0.0977 ***	1.8401 ***	−0.1052 ***
	(−35.45)	(19.50)	(−37.84)	(−36.06)	(19.31)	(−38.26)
Cash	0.0021 ***	−0.0453 **	0.0023 ***	0.0019 ***	−0.0490 ***	0.0021 ***
	(3.41)	(−2.56)	(3.73)	(3.21)	(−2.76)	(3.54)
FAR	−0.0266 ***	−1.7725 ***	−0.0191 ***	−0.0271 ***	−1.7829 ***	−0.0199 ***
	(−9.34)	(−17.09)	(−6.71)	(−9.56)	(−17.25)	(−7.03)
IAR	−0.0416 ***	0.0184	−0.0417 ***	−0.0418 ***	0.0143	−0.0419 ***
	(−4.60)	(0.05)	(−4.59)	(−4.68)	(0.04)	(−4.66)
Growth	0.0464 ***	0.1478 ***	0.0458 ***	0.0461 ***	0.1429 ***	0.0455 ***
	(24.96)	(2.77)	(24.95)	(24.99)	(2.69)	(24.96)
Industry/Year	Yes	Yes	Yes	Yes	Yes	Yes
Cons	0.0881 ***	0.5816 ***	0.0856 ***	0.0863 ***	0.5492 ***	0.0841 ***
	(18.58)	(3.86)	(18.01)	(18.18)	(3.63)	(17.70)
N	11,699	11,699	11,699	11,699	11,699	11,699
R2	0.2465	0.2566	0.263	0.2575	0.2604	0.2722
F	104.0627	137.7479	107.6162	109.9836	139.4004	112.8108

Note: ** p < 0.05, *** p < 0.01; the values in parentheses are t-values, using robust standard errors

from the first to the third column. We found that there was a strong relationship between the environmental performance (ENV) of an enterprise and its corporate value. Our experiment showed that this relationship had a positive impact on corporate value. We also found that there was a significant interaction between the environmental performance (ENV) of the enterprise and the mediating variable enterprise innovation, where the change in ENV positively affected enterprise innovation. We also found that both the environmental performance (ENV) and the enterprise innovation had a positive impact on corporate value, and this impact was due to their interaction. We found that the innovation capability of an enterprise could moderate the relationship between them to some extent, thus increasing corporate value. If H3a is verified, this means that the environmental changes occurring in an enterprise can directly or indirectly affect its financial situation. As can be seen in Table 6, we found that the innovation capability of an enterprise can not only improve its social performance, but also improve its corporate governance level, thus acting as a mediator. If H3b and H3c are verified, this means that the social responsibility and corporate governance of an enterprise can indirectly improve its corporate value through innovation. Based on Table 6, we found that the ESG performance of an enterprise was closely related to its innovation and had an indirect effect on its corporate value. If H3d is supported, this means that the innovation capability of an enterprise can indirectly affect its corporate value.

4.2.4. The Relationship between ESG and Corporate Value in the Context of Institutional Environment

This study delved into the interactions between corporate ESG, institutional environment, and corporate value and the moderating effects among them, through a main regression analysis based on Models 4 and 5. The results show that institutional environment has a significant effect on the relationship between ESG and corporate value. This research confirms Hypothesis H4: institutional environment has a positive effect on the corporate value of ESG of listed companies, i.e., the institutional environment can enhance the positive relationship between the two. By observing the regression results shown in

Table 7. Test results regarding the moderating effect of institutional environment on the relationship between ESG and corporate value.

	ROA
Variable	(1)	(2)	(3)	(4)
ESG	0.0013 ***
	(16.28)
ENV		0.0005 ***
		(6.41)
GOV			0.0003 ***
			(10.02)
SOC				0.0050 ***
				(31.21)
MI	0.0013 ***	0.0015 ***	0.0014 ***	0.0016 ***
	(5.46)	(6.36)	(5.77)	(6.97)
Controls	Yes	Yes	Yes	Yes
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0776 ***	0.0765 ***	0.0788 ***	0.0696 ***
	(15.46)	(15.19)	(15.70)	(13.94)
N	11,699	11,699	11,699	11,699
R2	0.2594	0.2443	0.2486	0.3066
F	109.0744	101.6141	103.5115	131.825
	(5)	(6)	(7)	(8)
Variable	ROA	ROA	ROA	ROA
ESG	0.0003
	(0.77)
MI	0.0011 ***	0.0015 ***	0.0014 ***	0.0007 *
	(4.68)	(6.02)	(5.97)	(1.81)
ESG × MI	0.0001 ***
	(2.77)
ENV		0.0004
		(0.98)
ENV × MI		0.0000
		(0.45)
GOV			−0.0001
			(−0.46)
GOV × MI			0.0000 ***
			(2.63)
SOC				0.0027 ***
				(3.66)
SOC × MI				0.0003 ***
				(3.08)
Controls	Yes	Yes	Yes	Yes
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0786 ***	0.0768 ***	0.0783 ***	0.0763 ***
	(15.66)	(15.15)	(15.59)	(13.98)
N	11,699	11,699	11,699	11,699
R2	0.2599	0.2443	0.2491	0.3073
F	106.3536	98.6278	100.8963	128.6497

Note: * p < 0.1, *** p < 0.01; the values in parentheses are t-values, using robust standard errors

, the following conclusions can be drawn: when institutional environment (MI) is added as a moderating variable and only the relationship between corporate ESG and corporate value is considered, it can be seen in the first column that the coefficient between ESG and corporate value is 0.0013 and is significantly positive, which indicates that increasing the level of corporate ESG can have a positive impact on improving the corporate value of the company. In addition, the interaction term (ESG*MI) between ESG and institutional environment (MI) is added in the fifth column, and although the regression coefficient of ESG is 0.0003 and insignificant, the coefficient of the interaction term (ESG*MI) is positive 0.0001 and is significant at the 1% level of significance. Therefore, it can be concluded that institutional environment has a positive moderating effect on the relationship between ESG and corporate value, supporting Hypothesis H4. In other words, institutional environment can enhance the positive effect of ESG on corporate value. Furthermore, the analysis of the three dimensions of corporate ESG led to a similar conclusion that institutional environment has a positive moderating effect on corporate value in terms of environmental performance, social performance, and corporate governance. Thus, these findings suggest that institutional environment plays a key role in the relationship between ESG and corporate value.

5. Extension Analysis

5.1. The Impact of ESG on Corporate Value: Examining the Heterogeneity of Corporate Property Rights

This study aimed to examine how the different types of property rights of enterprises affect their ESG, social responsibility, corporate governance, and corporate value. Therefore, we classified these enterprises into two categories: state-owned enterprises and non-state-owned enterprises, to investigate their interaction and their moderating mechanism in depth. Based on

Table 8. Test results regarding the heterogeneity of property rights on the impact of ESG on corporate value.

	(1)	(2)	(3)	(4)
Variable	State-Owned	Non-State-Owned	State-Owned	Non-State-Owned
ENV	0.0003 ***	0.0008 ***
	(3.47)	(5.98)
SOC			0.0038 ***	0.0058 ***
			(17.10)	(26.73)
GOV
ESG
Controls	Yes	Yes	Yes	Yes
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0819 ***	0.0898 ***	0.0771 ***	0.0827 ***
	(12.64)	(13.56)	(11.87)	(12.66)
N	4617	7082	4617	7082
R2	0.2604	0.2218	0.3061	0.2956
F	43.7217	55.8616	52.1465	80.4551
	(5)	(6)	(7)	(8)
Variable	State-owned	Non-state-owned	State-owned	Non-state-owned
ENV
SOC
GOV	0.0002 ***	0.0003 ***
	(5.45)	(8.58)
ESG			0.0010 ***	0.0016 ***
			(9.01)	(14.14)
Controls	Yes	Yes	Yes	Yes
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0828 ***	0.0914 ***	0.0819 ***	0.0879 ***
	(12.67)	(14.08)	(12.45)	(13.54)
N	4617	7082	4617	7082
R2	0.2634	0.2265	0.2711	0.2413
F	44.6432	57.4498	46.769	62.371

Note: *** p < 0.01; the values in parentheses are t-values, using robust standard errors

, we found that for both state-owned and non-state-owned enterprises, the regression coefficients of ESG and its three aspects were reliable at 1%, which further confirmed that ESG could significantly improve the corporate value of enterprises and was in line with previous research findings. Compared with the sample group of state-owned enterprises, the regression coefficients of ESG and its three aspects for non-state-owned enterprises increased significantly, which deserved our attention. We showed that under different property rights scenarios, the impact of ESG and its three dimensions on corporate value varied significantly, especially for non-state-owned enterprises, for whom ESG and its three dimensions had a more pronounced positive effect on corporate value, far exceeding the impact on state-owned enterprises. With the change in property rights structure in China, the impact of ESG on corporate value of state-owned enterprises has been less than the market competitive advantage brought by the social responsibility of private enterprises. By incorporating social responsibility into the ESG system, especially for those private enterprises that demonstrate a high level of performance, they can significantly enhance their market competitiveness and achieve sustainable development.

5.2. The Impact of ESG on Corporate Value: Examining the Development Level of the Location of the Enterprise

The economic development and the related policy system vary greatly across different regions in China, so it is very important to study these differences from different perspectives. In the eastern region, due to the advanced economy and sound system, people increasingly recognize the social responsibility of enterprises to improve corporate governance. As the government’s regulation of enterprises becomes stricter, these enterprises pay more attention to their own ESG level, hoping to ease the pressure of regulation and public opinion. In the eastern region, due to the economic boom, the government has abundant fiscal resources, which can support those enterprises that take on social responsibility by providing funds, tax incentives, and other policy measures. This can encourage them to improve their ESG level continuously. The governments in the central and western regions focus more on economic benefits and neglect the social responsibility of enterprises, which results in insufficient ESG investment in these areas, and due to the shortage of fiscal resources, these enterprises have to bear more costs to achieve ESG. Based on

Table 9. Test results regarding the impact of ESG on corporate value in different regions.

	(1)	(2)	(3)	(4)
Variable	Central and Western Regions	Eastern Region	Central and Western Regions	Eastern Region
ENV	0.0005 ***	0.0006 ***
	(3.47)	(5.64)
SOC			0.0045 ***	0.0052 ***
			(16.45)	(26.50)
GOV
ESG
Controls	Yes	Yes	Yes	Yes
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0880 ***	0.0825 ***	0.0815 ***	0.0764 ***
	(12.29)	(12.43)	(11.47)	(11.49)
N	3545	8154	3545	8154
R2	0.2503	0.2362	0.3075	0.3009
F	35.025	69.7113	42.5264	92.3871
	(5)	(6)	(7)	(8)
Variable	Central and western regions	Eastern region	Central and western regions	Eastern region
ENV
SOC
GOV	0.0003 ***	0.0003 ***
	(4.74)	(9.12)
ESG			0.0012 ***	0.0013 ***
			(7.97)	(14.54)
Controls	Yes	Yes	Yes	Yes
Industry/Year	Yes	Yes	Yes	Yes
Cons	0.0909 ***	0.0825 ***	0.0905 ***	0.0797 ***
	(12.71)	(12.60)	(12.71)	(12.14)
N	3545	8154	3545	8154
R2	0.2536	0.2412	0.2634	0.2528
F	35.2091	71.6177	36.5247	76.1237

Note: *** p < 0.01; the values in parentheses are t-values, using robust standard errors

, according to our research results, the value effect of ESG is especially evident in enterprises in the eastern region, which shows that ESG can effectively enhance corporate value. The empirical results are in line with expectations.

6. Research Conclusions and Policy Implications

This study selected unbalanced panel data of A-share main-board-listed companies on the Shanghai and Shenzhen exchanges in China from 2010 to 2020, and after screening, it finally identified 1981 companies and 11,699 research subjects. After the empirical study with Stata16 software, this study drew the following conclusions:

(1) Good corporate ESG performance is positively related to corporate value. As companies’ ESG levels improve, their corporate value also improves significantly to achieve the desired goals. Although ESG investment may increase the financial burden and costs imposed on enterprises in the short term, such investment can significantly improve the financial efficiency and performance of enterprises in the long term. By adopting a proactive ESG strategy, companies not only fulfill their social responsibilities, but also build virtuous partnerships, reduce business risks and capital costs, and thus increase corporate value. ESG activities not only gain the recognition of the government and society at large, but also bring companies a positive sense of responsibility, build a virtuous moral capital, and provide them with a lasting competitive advantage, thus enhancing the value of the company. By actively investing in ESG, companies can build a responsible image and enhance their value by reducing the cost of cooperation with different stakeholders. In order to achieve green and sustainable development, companies should invest heavily in ESG to enhance their corporate value and bring more benefits to society.

(2) Corporate innovation plays an important mediating role between a firm’s ESG and corporate value, in line with the corresponding hypothesis. Firms actively improve environmental, social, and governance aspects. According to the principles of stakeholder and social networks, companies should take the initiative to assume their own social responsibility, thus forming a complex and broad alliance that enables them to better communicate and share information with other stakeholders, thus achieving a win–win situation. By introducing external knowledge, enterprises are able to change their internal knowledge structure, stimulate innovative thinking, and thereby obtain social resource support from various parties to achieve enterprise innovation. This helps to enhance the technological innovation of enterprises and ultimately achieve competitive advantage and create economic value for enterprises. Corporate governance is an important factor influencing investment in corporate innovation resources, while corporate innovation can effectively integrate and utilize existing resources, thus improving the operational efficiency and financial status of the company.

(3) The relationship between corporate ESG and corporate value is moderated by the role of the institutional environment. The institutional environment has a positive moderating effect on the relationship between corporate environmental performance and corporate value and also has a positive moderating effect on the relationship between corporate governance and corporate value, which is consistent with the research hypothesis. With the increasing improvement of relevant laws and regulations, the institutional environment has a positive moderating effect on the relationship between corporate ESG and corporate value. The better the institutional environment, the greater the contributing effect; conversely, the worse the institutional environment, the lower the contributing effect.

After an in-depth study, this study found that corporate value is significantly improved by improving ESG levels. With the increasingly stringent disclosure requirements for listed companies on various exchanges, ESG disclosure has changed from being initially voluntary to a more stringent and mandatory requirement. With the introduction of policies and regulations in various countries, companies are under increasing regulatory pressure and are therefore forced to pay more attention to environmental protection and take their social responsibilities seriously to ensure compliance with relevant laws and regulations. Companies should abandon outdated mindsets and realize that investing in environmental resources, taking social responsibility, and improving corporate governance structures will not lead to increased costs. ESG factors are incorporated into a company’s long-term development plan, which can not only help transform the company and improve the efficiency of resource utilization but also increase investors’ confidence in the company. In this way, companies can build a good social image, enhance competitiveness, and achieve long-term, sustainable development. Therefore, this paper proposes the following research implications:

(1) Companies should establish and attach great importance to the ESG concept in order to re-examine the perception of corporate sustainable development. ESG not only covers corporate social responsibility but also includes the concept of corporate sustainable development in many aspects, including those that are social and environmental and internal governance. In the current economic and social transition period, enterprises are facing a long-term innovation drive and short-term performance pressure and need to balance the relationship between the two. By strengthening the ESG concept of enterprises, we can promote corporate innovation and performance and enhance their economic competitiveness and sustainable development capability. With the promotion of high-quality development, enterprises should realize that investing in environmental protection, social responsibility commitment, and corporate governance will not bring about additional economic losses. By improving their ESG level, enterprises can encourage R&D innovation and use more environmentally friendly technologies, thus reducing the risk of proxy and enhancing their competitiveness in the market; by establishing good partnerships, they can ultimately drive long-term, stable growth.

(2) In order to achieve sustainable development, institutional investors should monitor and guide listed companies in their compliance with social responsibility and optimize corporate governance. Therefore, investors should make responsible investments based on a company’s ESG performance. This means that investors should look not only at their corporate value but also at their environmental, social, and governance performance when deciding which companies to invest in. The application and in-depth understanding of ESG concepts by investors can assist companies in improving their operational management models; effectively controlling risks; achieving sustainable, long-term returns; and enhancing their sustainable competitiveness.

(3) In order to promote economic development, the government should establish a comprehensive ESG assessment mechanism, implement effective information disclosure, and provide appropriate incentives or disciplinary actions to companies with good performance. To help companies with good ESG statuses, the government will provide various support measures, including reducing tax burden, lowering loan interest rates, offering preferential conditions, and providing more opportunities to participate in bidding; for companies with poor ESG statuses, the government should adopt a series of severe punitive measures to improve the investment environment of listed companies and the capital market by establishing a negative list: for example, strictly controlling the number of loans and raising the bidding threshold, so as to effectively punish the violations of laws and regulations. The government should strengthen the improvement of the corporate ESG information disclosure mechanism and encourage companies to actively disclose ESG information in order to provide reliable data support for stakeholders, so as to realize the complete development path of “ESG regulation and standard leading—sustainable investment driven by capital market—sustainable operation of listed companies—high quality development of economy and society”. This will lead to a complete development path of “ESG regulation and standard leading—capital market sustainable investment driving—listed companies sustainable operation—economic and social quality development”.

7. Research Limitations and Future Prospects

This study selected the listed companies on the main board of the Shanghai and Shenzhen A-shares from 2010 to 2020 as the research object and constructed a panel fixed-effect regression model through theoretical analysis to explore how corporate ESG affects corporate value, as well as its role in promoting corporate innovation and institutional environment regulation. Finally, this study drew some valuable conclusions. However, due to the low research level and lack of experience of the authors, there are still some imperfections in this paper. The following are the shortcomings and future improvement opportunities in this research process, intended to provide some reference significance for other scholars in this field.

(1) First of all, in terms of sample data, this paper only focused on the listed companies on the main board of the Shanghai and Shenzhen A-shares from 2010 to 2020 as the research object, and future researchers can broaden their research object and find new innovative points. In addition, due to the existence of many ESG rating agencies and the lack of uniformity in the rating system, the ESG score data used may not accurately reflect the actual situations of the enterprises. The ESG data constructed in this paper, although referring to many literatures, also has certain limitations. In the future, with the continuous development of the ESG field, its concept and definition will inevitably become more precise, and data acquisition will also become more transparent and standardized.

(2) Secondly, in terms of variable processing, this paper only considered five variables: asset–liability ratio, cash ratio, fixed asset ratio, intangible asset ratio, and enterprise growth rate. However, due to the many factors affecting corporate value, some of these variables may have been ignored, which may have affected the final research results.

(3) Finally, in terms of model application, the panel fixed-effect model used in this paper is based on linear regression but still cannot fully reveal the complexity between two variables. Therefore, it is necessary for researchers to explore their nonlinear relationship and other complex interactions in depth in order to better understand the impact path of the mechanism.