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ESG Performance, Environmental Uncertainty, and Firm Risk

Xin Liu & Yuan Song

Journal of International Financial Management and Accounting2025https://doi.org/10.1111/jifm.12227article
AJG 2ABDC A
Weight
0.69

Abstract

The growing concern over sustainable development has raised critical questions about the role of environmental, social, and governance (ESG) performance in shaping organizational outcomes. While prior research underscores the importance of ESG, there is limited understanding of its impact on firm risk, particularly under varying levels of environmental uncertainty. Using a data set of 9201 observations from Chinese listed companies on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2022, this study investigates how ESG performance influences firm risk and the moderating effect of environmental uncertainty. Our findings reveal that ESG performance reduces firm risk by lowering environmental penalties, easing financing constraints, enhancing corporate reputation, and improving access to government subsidies. Additionally, environmental uncertainty strengthens the negative impact of ESG performance on firm risk. These results highlight the critical role of ESG performance in mitigating corporate risk and offer practical implications for firms, investors, and policymakers seeking to align corporate strategies with sustainable economic development goals.

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https://doi.org/https://doi.org/10.1111/jifm.12227

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@article{xin2025,
  title        = {{ESG Performance, Environmental Uncertainty, and Firm Risk}},
  author       = {Xin Liu & Yuan Song},
  journal      = {Journal of International Financial Management and Accounting},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1111/jifm.12227},
}

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ESG Performance, Environmental Uncertainty, and Firm Risk

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Evidence weight

0.69

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.79 × 0.4 = 0.32
M · momentum1.00 × 0.15 = 0.15
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.