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Nonlinear impact of economic policy uncertainty on corporate ESG performance: Regional, industrial and managerial perspectives

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  • Wang, Jianling
  • Ma, Jia
  • Li, Xiuling
  • Wang, Chen

Abstract

The relationship between Economic Policy Uncertainty (EPU) and corporate Environmental, Social, and Governance (ESG) practices has garnered significant attention, yet the nature of this relationship remains unclear. While previous studies have explored linear associations, the potential for nonlinear dynamics and the role of contextual factors have been largely overlooked. This study addresses this gap by investigating the nonlinear relationship between EPU and ESG performance, considering the moderating effects of regional marketization, industry competition, and managerial green perception. Using a comprehensive dataset of Chinese listed companies from 2011 to 2022, we employ quantitative methods including baseline regression analysis, robustness tests, and heterogeneity analysis across different stages of the firm lifecycle. Our findings reveal an inverted U-shaped relationship between EPU and ESG performance, indicating that moderate levels of EPU encourage ESG engagement, while excessive uncertainty leads to declined practices. Furthermore, we find that regional marketization, industry competition, and managerial green perception significantly moderate this relationship, with regional factors exerting the strongest influence. These results contribute to the advancement of theoretical frameworks in sustainable finance and offer valuable insights for managers and policymakers navigating the complex interplay between economic uncertainty and corporate sustainability in diverse contexts.

Suggested Citation

  • Wang, Jianling & Ma, Jia & Li, Xiuling & Wang, Chen, 2025. "Nonlinear impact of economic policy uncertainty on corporate ESG performance: Regional, industrial and managerial perspectives," International Review of Financial Analysis, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:finana:v:97:y:2025:i:c:s105752192400704x
    DOI: 10.1016/j.irfa.2024.103772
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    More about this item

    Keywords

    Economic policy uncertainty; ESG performance; Nonlinear relationship; Regional marketization; Industry competition; Managerial green perception;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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