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Published Version (Advanced Access)CC BY-NC-ND V4.0, Open Access
Journal article
Navigating Economic Policy Uncertainty: The Role of ESG Performance in Mitigating the Risk of Nonfinancial Firms in China
Economics & Politics, Vol.37(3), pp.958-977
2025
Appears in UniSC Supported Open Access Outputs
Abstract
Amid rising economic policy uncertainty (EPU) and escalating financial risks facing nonfinancial firms in China, this study investigates the impact of EPU on firm‐level risk exposure, with a particular focus on the moderating role of environmental, social, and governance(ESG) performance. Using panel data from nonfinancial firms listed on China's A‐share market between 2011 and 2020, the empirical analysis finds that higher levels of EPU significantly increase both systematic and idiosyncratic risks. Importantly, stronger ESG performance mitigates the positive relationship between EPU and firm risk, underscoring ESG as a strategic buffer in periods of heightened policy uncertainty and reflecting the broader interaction between corporate governance and China's political‐economic environment. Further analysis reveals heterogeneity in this moderating effect: ESG performance plays a more pronounced role in firms that are highly sensitive to policy changes or located in regions with higher levels of marketization. These findings remain robust across various model specifications and endogeneity checks, highlighting the strategic value of ESG in managing policy‐induced risks within China's evolving institutional landscape.
Details
- Title
- Navigating Economic Policy Uncertainty: The Role of ESG Performance in Mitigating the Risk of Nonfinancial Firms in China
- Authors
- Yinan Fan - Australian National UniversitySajid Anwar (Corresponding Author) - University of the Sunshine Coast, Queensland, School of Business and Creative IndustriesRui Long - Jinan University
- Publication details
- Economics & Politics, Vol.37(3), pp.958-977
- Publisher
- Wiley-Blackwell Publishing Ltd.
- Date published
- 2025
- DOI
- 10.1111/ecpo.12352
- ISSN
- 1468-0343; 0954-1985
- Copyright note
- © 2025 The Author(s). Economics & Politics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
- Data Availability
- The data that support the findings of this study are available from the corresponding author upon reasonable request.
- Organisation Unit
- School of Business and Creative Industries; Indigenous and Transcultural Research Centre
- Language
- English
- Record Identifier
- 991129951902621
- Output Type
- Journal article
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