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ESG Performance and Stock Returns: Evidence from Chinese Main Board Listed Enterprises in the Offshore Capital Market

Author(s)

Zhenyu Zhou

Affiliation(s)

Xi'an Jiaotong-Liverpool University, Suzhou, China

Abstract

This paper examines how ESG performance affects stock returns for Chinese enterprises listed on the offshore capital market main board. We use an unbalanced panel dataset covering 3,842 firm-year observations from 2016 to 2024. The ESG measure comes from MSCI ESG Ratings. We build a parallel mediation model with two channels: financial performance measured by return on assets (ROA) and innovation capacity measured by annual patent count. The full sample analysis confirms a positive and significant ESG-return relationship. A one-unit increase in the MSCI ESG score raises annual stock return by 0.19 percentage points. Mediation tests show that ROA accounts for about 50 percent of the total effect, while patent count accounts for about 9 percent. Subgroup tests reveal sharp heterogeneity. The ESG-return effect is strong and significant for locally listed Chinese firms and non-state-owned enterprises. It is weak and not significant for A-share and offshore dual-listed firms and state-owned enterprises. We attribute these patterns to differences in investor composition, disclosure regulation, and the way markets interpret ESG signals across firm types. The findings have direct implications for investors, corporate managers, and market regulators.

Keywords

ESG Performance; Stock Returns; Mediation Analysis; Offshore Capital Market of Chinese Enterprises; Innovation Capacity; Stakeholder Theory

References

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