Exploring the Multidimensional Effect of ESG Performance on Corporate Innovation Capability

Yu Tan¹

Section:Research Paper, Product Type: Journal-Paper
Vol.12 , Issue.3 , pp.49-55, Sep-2024

Online published on Sep 30, 2024

Copyright © Yu Tan . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
Recently, the focus on environmental responsibility has intensified due to the push for high-quality and sustainable development strategies. The concept of Environmental, Social, and Governance (ESG) has become an important tool for evaluating a company`s long-term sustainability and social impact, serving as a critical reference indicator for investors` decision-making. This research employs a sample of A-share listed companies in China, designing an Innovation Capability (ICL) indicator to measure corporate innovation capability. By constructing a fixed panel model, the study analyzes the impact of ESG performance on corporate innovation capability. The findings reveal that: 1) A notable positive correlation exists between ESG performance and corporate innovation capability, with companies demonstrating strong ESG performance excelling in both innovation input and output; 2) Agency costs play a mediating role between ESG performance and corporate innovation capability. Good ESG performance can reduce agency costs, thereby promoting corporate innovation; 3) Factors such as corporate growth potential, cash flow levels, company size, and board size also significantly affect corporate innovation capability. Based on these findings, companies should emphasize ESG practices, as these can not only improve corporate governance and enhance financial performance but also boost innovation capability, guiding sustainable development and promoting high-quality socio-economic development.

Key-Words / Index Term :
ESG, Corporate Innovation Capability, Mediation Effect, Agency Costs, Corporate Growth, Cash Flow Level

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