The U-shaped link between ESG performance and corporate risk-taking

Bibliographic Data

ID19484200
AuthorsHaodong Chang (0000-0003-0639-279X, Zhongnan University of Economics and Law), Tian Feng (0000-0002-9822-5632, State Grid Corporation of China (China)), Xi Zhang (0009-0004-8281-1030, University of Finance and Economics), Xuehui Zhang (0000-0002-3759-8056), Kun‐Shan Wu (0000-0001-9550-8840, Tamkang University)
Year2026
Volume17
Issue2
Pages515-567
Publication date2026-05-08
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueOeconomia Copernicana (JOURNAL)
Journal identifiersISSN: 2083-1277 • E-ISSN: 2353-1827
PublisherInstytut Badan Gospodarczych / Institute of Economic Research (PUBLISHER)
DOI10.24136/oc.3611
OpenAlexW7160695921
LanguageEN
References cited84

Research background: Risk-taking has long been considered fundamental to sustainable firm growth and performance. Environmental, social, and governance (ESG) is crucial to aligning risk-taking decisions with sustainable development goals and enhancing long-term value and stakeholder trust; however, ESG commitments can potentially become a financial burden. Purpose of the article: This study examines the impact of ESG practices on corporate risk-taking (CRT), examining the underlying mechanisms and the U-shaped relationship that suggests the potential drawbacks of excessive ESG commitments. Methods: Using a panel fixed-effect model for Chinese publicly listed firms disclosing ESG data from 2010 to 2023, this study empirically examines the curvilinear relationship between ESG and CRT, validated by the three-step U-test, instrumental variables analysis, and propensity score matching. A panel mediation effect model and moderating effect model for the U-shaped channels are also applied. Findings & value-added: The findings confirm a robust U-shaped curve across multiple sensitivity tests. On disaggregating the ESG components, environmental and social exhibit similar U-shaped curves, whereas governance has an inverted U-shaped relationship with CRT. The mechanism tests reveal the corporate innovation level is a crucial transmission channel for the U-shaped effect, and institutional ownership acts as a moderator influencing CRT through ESG. The heterogeneity analysis further demonstrates the U-shaped effect of ESG performance on CRT is more consequential in non-environmentally sensitive industries and non-state-owned enterprises. These findings demonstrate ESG practices, while motivated by ethical intention, can have a double-edged effect. The research provides novel insights and practical recommendations for policymakers, managers, and stakeholders, aiding in the development of effective ESG policies and strategies

Corporate governance · Corporate social responsibility · Mediation · Moderated mediation · Moderation · Panel data · Stakeholder · Sustainable development · Corporate Social Responsibility Reporting · Environmental Sustainability in Business · Risk Management in Financial Firms

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