ESG, Corporate R&D Investment, and Financial Performance: Evidence from China's Typical Heavy Pollution Industries

Abstract

Given the critical function corporations serve in economic progression, a burgeoning body of evidence underscores the necessity for the amalgamation of Environmental, Social, and Governance (ESG) performance with research and development (R&D) expenditures to bolster corporate proficiency and value. Consequently, strategizing the harmonious application of R&D expenditure and ESG performance emerges as a topic of significant import. This research delves into the isolated repercussions of R&D investments and ESG, in addition to their cumulative impact on financial performance, utilizing data amassed from representative industries with high pollution output, traded in Shenzhen and Shanghai's stock markets. The findings reveal an inconsequential direct correlation between ESG and short-term financial performance. Nevertheless, both R&D investment and ESG possess the capacity to directly shape a corporation's prospective market value. This study enriches existing literature regarding the influence of R&D investment and ESG on future corporate market value. The symbiotic influence of R&D investment and ESG offers insights germane to decision-making processes within the ambit of sustainable development, thereby facilitating the balanced evolution of China's economic, societal, and environmental spheres.