The Impact Of ESG Performance On Corporate Misconduct: Evidence From Chinese A-Share Listed Companies

Authors

Jieyi Chen Universiti Tun Abdul Razak (UNIRAZAK)
Mui Yee Cheok Universiti Tun Abdul Razak (UNIRAZAK)

Keywords:

Corporate misconduct, ESG performance, Agency costs

Abstract

As corporate misconduct remains a persistent governance challenge, increasing attention has been devoted to whether ESG practices can effectively restrain such behavior. This study examines the impact of ESG performance on corporate misconduct and further explores the mediating role of agency costs. Using panel data from Chinese A-share listed firms over the period 2014–2023, the results show that stronger ESG performance significantly reduces corporate misconduct. Further analysis indicates that this relationship operates through an internal governance mechanism whereby ESG performance lowers agency costs, which in turn restrains corporate misconduct. These findings contribute to a deeper understanding of ESG performance as an ex-ante governance mechanism and provide policy-relevant insights into improving corporate governance and promoting sustainable development in emerging economies.

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