The impact of ESG effort on corporate financial performance: with CEO power as a moderating variable

This study investigates the relationship between Environmental, Social, and Governance (ESG) factors and Corporate Financial Performance (CFP), alongside the moderating role of CEO power. Existing research highlights the complex and ambiguous nature of this relationship, with findings varying across regions and contexts. While studies in developed countries often show mixed or inconclusive results, emerging markets like China remain underexplored, necessitating a deeper investigation into the specific impact of ESG factors. Using data from A-share listed companies in China, from 2013 to 2022, this quantitative study examines how ESG factors influence CFP and the role of CEO power in this dynamic. The research employs a two-step approach to examine the relationship between ESG factors and CFP: first, financial performance is decomposed into explained and unexplained components based on the Fama-French five-factor model. The unexplained component is then regressed against each ESG factor to determine their individual impacts on financial performance.