The impact of ESG on financial performance: A revisit with a regression discontinuity approach

Ziwei Xu, Wenxuan Hou*, Brian G.M. Main, Rong Ding

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

This study revisits the question of “whether firms are doing well by doing good?”. We examine shareholders-sponsored corporate socially responsible (CSR) proposals related to Environmental, Social, and Governance (ESG) that are voted to pass or fail by a small margin. The adoption of those “close call” proposals is regarded as equivalent to a random assignment of CSR policies and, therefore, provides a quasi-experimental setting to capture the causal influence of CSR on firm performance. We apply the regression discontinuity design (RDD) and find that CSR proposals’ passage leads to a significant positive abnormal return on the voting day. The results are robust with both parametric and nonparametric approaches of RDD and different polynomial orders. However, we fail to identify a significant change in financial performance in the long-term. One possible reason is that passing a CSR proposal could be symbolic, rather than substantial.

Original languageEnglish
Article number30
Pages (from-to)1-19
Number of pages19
JournalCarbon Neutrality
Issue number1
Early online date25 Aug 2022
Publication statusPublished - Dec 2022

Keywords / Materials (for Non-textual outputs)

  • corporate social responsibility
  • financial performance
  • regression discontinuity


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