Corporate Governance, ESG Performance and Firm Performance: A Literature-Based Analysis of Chinese Listed Companies

Abstract

Environmental, Social and Governance (ESG) has become an important framework for assessing corporate function, governance, sustainability, and the competitiveness of corporations, as companies are increasingly looking for a path towards sustainable development and invest responsibly. ESG indicators reflect not only a company’s environmental responsibility and social contribution, but also the quality of its governance and a company’s strategic sustainability. This study reviews the literature on corporate governance, corporate social responsibility (CSR), and ESG performance and investigates its association with the performance of Chinese-listed firms. Through integrating the existing literature and analysis of ESG disclosure from Chinese listed companies we propose to investigate the theoretical connection between corporate governance and sustainable corporate performance via ESG practices. The results imply that a well-structured corporate governance plays a major role in achieving increased ESG performance, in which corporate reputation in turn enhances its status while also lowering the operating risk and enhancing long-term financial output. Furthermore, corporate sustainability reports reveal that ESG strategies have emerged as a part of businesses and governance constructs developed by leading Chinese companies. The article also addresses the implications of ESG governance on sustainable corporate development, presents suggestions for enhancing ESG disclosure and governance systems in Chinese firms.