Study on the impact of trade policy uncertainty on the performance of enterprise ESG performance

TL;DR

This study investigates how trade policy uncertainty influences Chinese companies' ESG performance, revealing that increased uncertainty can improve ESG outcomes through heightened competition and green innovation, especially in high-tech firms.

Contribution

It provides empirical evidence on the positive effects of trade policy uncertainty on ESG performance and identifies mechanisms like competition and innovation, with a focus on Chinese listed companies.

Findings

Trade policy uncertainty significantly improves ESG performance.

High-tech firms benefit more from trade policy uncertainty.

Trade uncertainty promotes green technological innovation.

Abstract

Trade policy uncertainty has become a significant feature of today's global economy. While its impact on free trade is evident, its microeconomic effects remain open to debate. This study explores the influence of trade policy uncertainty on corporate ESG performance and its underlying mechanisms, using data from A-share listed companies in China from 2010 to 2020. The findings reveal that increased trade policy uncertainty significantly and robustly enhances corporate ESG performance. Heterogeneity analysis indicates that high-tech enterprises are better equipped to improve their ESG performance in response to trade policy uncertainty. Furthermore, strengthening internal controls and appointing CEOs with environmental backgrounds also help firms seize the opportunities arising from trade policy uncertainty. In terms of mechanisms, trade policy uncertainty intensifies industry competition, compelling firms to enhance their ESG performance to gain market share. Additionally, it stimulates green technological innovation, further optimizing ESG outcomes. Therefore, efforts should focus on improving the ESG standards system, establishing ESG incentive policies, increasing the transparency and predictability of trade policies, and promoting corporate green development to advance national sustainable development goals.