A Study of the Impact Mechanism of Corporate ESG Performance on Surplus Persistence

Abstract

Although more scholars have studied the economic consequences of ESG, no conclusive results have been reached yet. In addition, there is a lack of research on the relationship between corporate ESG performance and surplus persistence. This paper adopts the ordinary least squares (OLS) method to analyze the impact of corporate ESG performance on corporate surplus persistence based on stakeholder theory and principal-agent theory using companies listed in Shanghai and Shenzhen A-shares from 2010 to 2022 as research objects. It was found that there is a significant positive correlation between ESG performance and both the social (S) and governance (G) dimensions, as well as surplus sustainability; conversely, the environmental (E) dimension is significantly negatively correlated with surplus sustainability in the short term, but further analysis reveals that it can enhance corporate surplus sustainability in the long run. Institutional investor shareholding and debt financing costs mediate the relationship between corporate ESG performance and both the S and G dimensions, influencing surplus persistence. Further analysis shows that the positive correlation between a firm’s ESG performance and its governance (G) dimension related to surplus persistence is more significant in the eastern region.

1. Introduction

To address the serious challenges of climate change, environmental pollution and loss of biodiversity, China has taken the initiative to put forward the goals of “carbon peak” by 2030 and “carbon neutral” by 2060, with which the ESG concept has been widely spread in China. Enterprises, as micro-entrepreneurs in economic development, are the key driving forces for green transformation and sustainable development in society and should assume the responsibility of protecting the environment, giving back to society, and strengthening governance. However, whether the measures taken by enterprises to improve their ESG performance can bring them higher profits, help them realize sustainable development, and achieve a “win–win” situation in terms of economic and social benefits is a matter of debate in both the industry and academia. With the growing popularity of ESG concepts globally, many scholars are committed to exploring its multi-dimensional impact and practice path. As a form of corporate social responsibility, the relationship between corporate ESG performance and financial performance has been explored by many scholars, and most scholars believe that corporate ESG performance is positively correlated to corporate performance [1]. These scholars point out that corporate ESG performance can reduce the cost of capital [2], and improve financial performance [3,4], and in the long term, the positive impact of corporate ESG performance on performance is more stable than in the short term [1]. Other scholars believe that the benefits gained by enterprises through social responsibility do not compensate for the costs incurred, and lead to the diversion of production resources [5], which will reduce the market competitiveness of enterprises [6] and stock returns [7] and, thus, reduce enterprise value [8]. It can be seen that the relationship between corporate ESG performance and corporate financial performance is complex, and it is difficult for scholars to form a definitive conclusion on the relationship.

In addition, surplus persistence, as a key measure of firm value, also conveys rich predictive information to investors and influences investor decisions. Earnings persistence is one of the indicators of the quality of corporate surplus, which focuses on the ability of the accounting surplus realized in the current period to continue to be realized in future periods [9]. It has been found that corporate accounting information [10], the fulfillment of social responsibility [11], and environmental performance [12] will affect the volatility of corporate surplus, while corporate surplus sustainability will further affect corporate value [13]. Given this, this paper explores the relationship between ESG performance and surplus sustainability based on stakeholder theory, the principal-agent theory, and the three aspects of corporate environment, society, and corporate governance. In addition, this paper further investigates how institutional investors’ shareholding ratio and debt financing costs play a role in the relationship between ESG performance and surplus sustainability, aiming to clarify the relationship between the two and provide the internal driving force for enterprises to continuously improve ESG performance. It was found that there is a positive correlation between ESG performance and its social and governance dimensions with surplus persistence, and this positive correlation is more significant in the eastern subsample. There is a negative correlation between environmental dimensions and surplus sustainability in the short run, and it enhances surplus sustainability in the long run. Institutional investor shareholding and debt financing costs play a mediating role in the relationship between ESG performance, its social and governance dimensions, and surplus persistence.

The marginal contributions of this paper are as follows: first, most of the existing studies have been conducted from the perspective of the overall ESG performance [14], and this paper will further refine the research perspective by assessing their impact on surplus persistence more comprehensively from the environmental, social, and corporate governance dimensions. Second, the ESG performance on surplus persistence is found, i.e., the fulfillment of ESG responsibilities by enterprises will enhance their surplus persistence by reducing their debt financing costs and increasing the proportion of institutional investors’ shareholdings. This study provides a new perspective to explain the complex relationship between ESG responsibility and corporate surplus sustainability.

2. Literature Review

2.1. ESG and Corporate Value

The fulfillment of ESG responsibilities by enterprises can enhance their market competitiveness, reduce the various risks they face, attract more sustainability-focused investments, and lay a solid foundation for their long-term value growth. Compared with short-term investments that seek immediate returns, ESG investments pay more attention to the long-term value and sustainable development of enterprises. Therefore, research on the impacts of three dimensions of corporate ESG performance on surplus sustainability has been gradually attracting attention. Existing studies have examined the relationship between ESG performance and surplus sustainability from the dimensions of environment, social responsibility, and corporate governance. It was found that environmental regulatory pressure will weaken the surplus sustainability of enterprises [15]; there is a positive relationship between social responsibility and surplus sustainability [16]; good corporate governance structure can enhance the surplus sustainability of enterprises [17] and reduce the risk of share price collapse of enterprises [18]; and there are differences in the impacts of different corporate governance mechanisms on surplus sustainability [19]. However, there are fewer studies on the relationship between overall corporate ESG performance and surplus persistency, and most of the existing studies are related to the economic consequences of ESG and explore the relationship between ESG and enterprise value. Most scholars believe that enhancing corporate ESG performance can increase corporate value. First, according to stakeholder theory, stakeholders are indispensable in the growth process of enterprises. Some scholars point out that ESG activities implemented by enterprises to cater to stakeholders enhance the reputation of enterprises in the public [20], which indirectly brings performance growth for enterprises [21]. Secondly, based on the signaling theory, the fulfillment of ESG responsibilities by enterprises conveys positive signals to the outside world [22], and improving the transparency of non-financial information reduces the investment uncertainty of investors, broadening the financing channels of enterprises [23] and enhancing the value of enterprises. In particular, some scholars have studied the ESG performance of enterprises in the context of the new crown epidemic and found that better ESG performance was associated with fewer losses during the COVID-19 epidemic [24]. In addition, some scholars from other perspectives have confirmed that the fulfillment of corporate ESG responsibilities can improve corporate innovation performance [25], financial performance [26], stock price performance [27], etc.

However, some scholars also point out that the fulfillment of ESG responsibilities will weaken corporate value. First, companies will invest a lot of resources to improve ESG performance [28], but the output is difficult to realize in the short term, which will weaken the growth ability of the company [29] as well as economic benefits [30]. Secondly, the motivation of enterprises to carry out ESG activities is questionable. According to the legitimacy theory, enterprises whose legitimacy is threatened will fulfill their social responsibility and regard it as a means to enhance their legitimacy [31], and such a fulfillment need not be complete and clear [32]. Therefore, when firms face threats to legitimacy and need to implement ESG behaviors to enhance corporate reputation, the ESG information they disclose may not accurately reflect the real situation of the firms [33]; instead, this can further deteriorate the principal-agent problem between the firms and stakeholders, weakening the value of the firms [34]. Finally, during the process of fulfilling ESG responsibilities, enterprises must disclose relevant information [35]. However, since there is no mature ESG disclosure system [36], enterprises may incur extra costs while figuring out the information disclosure standard [37], thus weakening enterprise performance.

2.2. ESG, Institutional Investor Ownership, and Surplus Sustainability

Regarding the relationship between corporate ESG performance and institutional investors’ shareholding, scholars generally believe that corporate ESG performance can increase institutional investors’ willingness to invest [38]. For example, based on the signaling theory, Bai Xiong et al. pointed out that good ESG performance conveys positive signals to the outside world, attracts more institutional investors who focus on the long-term development of the enterprise, and enhances the enterprise value [39]. Xie Liufang and Lv Sijie, on the other hand, from the perspective of stakeholders, point out that when ESG performance brings benefits to institutional investors, it attracts more institutional investors and provides a stronger guarantee for the firm’s long-term returns [40]. Furthermore, Ye Yingying and Starks categorize institutional investors into long-term and short-term institutional investors, according to the nature of institutional investors, pointing out that the ESG activities of enterprises can enhance long-term performance and attract more long-term institutional investors [41,42].

However, there is no academic consensus on the relationship between institutional investors’ shareholding and surplus sustainability. Some scholars believe that institutional investors are more concerned about the long-term returns of enterprises, and increasing the proportion of institutional investors’ shareholding can enhance the innovation ability of enterprises [43] and investment efficiency. In addition, by intervening in the operation of enterprises, institutional investors can alleviate the principal-agent problem, reduce profit manipulation, and enhance the sustainability of surplus [44]. Another group of scholars believe that the nature of institutional investors has a greater impact on the sustainability of corporate surplus. Since the goal of short-term institutional investors is to sell their stocks in the short term to earn the price difference, short-term institutional investors are more likely to prefer surplus management to cover up losses, which will weaken the surplus sustainability of enterprises [45,46]. Similarly, Song Jianbo et al., based on the alliance hypothesis, pointed out that there is a suspicion of “collusion” between institutional investors and executives, and improving the short-term profits will benefit both parties, increasing the possibility of profit manipulation, which will affect the sustainability of corporate surpluses [47].

2.3. ESG, Cost of Debt Financing, and Surplus Persistence

More studies have been conducted to show that the positive practices of firms in environmental, social, and corporate governance (ESG) responsibility can reduce the cost of debt financing for firms. Scholars who hold this view mainly explain this relationship based on the information asymmetry theory, reputation theory, and principal-agent theory. Among them, the information asymmetry theory highlights that, in a market economy, differences in the degree of information mastery of different participants may lead to market failure, especially when the information-superior party takes advantage of the information to the detriment of the information-inferior party. Reputation theory emphasizes that firms should establish a good reputation in the market, which can be used as an intangible asset to bring them long-term economic and social benefits. Principal-agent theory focuses on how the principal can design an optimal contract to incentivize the agent to act in the principal’s interest in an environment of information asymmetry and conflicting interests, and at the same time, alleviate the agency problem arising from the separation of ownership and management. Specifically, during the process of fulfilling their ESG responsibilities, enterprises will proactively disclose more information on environmental, social, and corporate governance. Comprehensive information disclosure improves the transparency of the enterprise, enabling investors, creditors, customers, and other stakeholders to more accurately understand the enterprise’s operating conditions and risk levels, thereby reducing information asymmetry. In addition, ESG practices require companies to establish sound governance and monitoring mechanisms to ensure that management can act in the interests of shareholders and other stakeholders. Optimizing the governance structure helps reduce management’s self-interested behavior, thereby reducing agency costs.

For example, Mei Yali and Zhang Qian found that enhancing ESG performance can improve the attention of analysts and institutional investors, and reduce the cost of debt financing [48]; Lian Yonghui and others pointed out that enhancing ESG performance can reduce the cost of debt financing, be affecting financial risk, information transparency, and the agency problem associated with debt, respectively [49]. Further, Qiu Muyuan et al. point out that there are differences in the role of ESG dimensions in lowering corporate financing costs, and that improving environmental and governance performance can reduce debt financing costs more significantly than social responsibility [50]. Reducing debt financing costs will further enhance the sustainability of corporate surplus. However, some scholars also argue that improved ESG performance will lead to higher debt financing costs. Scholars who hold this view believe that financial institutions are still more concerned about the business performance and financial situation of enterprises and have a lower degree of recognition of ESG. Therefore, when enterprises implement ESG behaviors, financial institutions will require higher risk premiums, i.e., increase the cost of debt financing [51]. In addition, based on the trade-off theory and principal-agent theory, other scholars point out that implementing ESG behaviors will encroach on the resources of enterprises, reduce the core competitiveness of enterprises [52], and use the reputation established through ESG behaviors to commit more illegal behaviors, ultimately increasing the amount of risk compensation for creditors [32].

2.4. Literature Commentary

Currently, there is a large body of literature on the economic consequences of ESG, mainly concerning the impacts of ESG on a firm’s value. However, the relationship between ESG and a firm’s value has not yet been finalized. Some scholars, based on signaling theory, believe that there is a positive association between ESG performance and enterprise value and that good ESG practices can send positive signals to the market, as well as help enterprises enhance their reputation and market value [10]. Other scholars, based on the theories of legitimacy and limited resources, believe that there is a negative correlation between ESG and enterprise value [6]. In addition, there is a lack of research on the relationship between ESG and surplus sustainability, and most of the studies start from the perspective of financing constraints [49]. To understand the impact of ESG on corporate surplus sustainability more comprehensively, this paper draws on the existing literature and incorporates two important factors, namely, institutional investor shareholding and cost of debt financing, into the research framework, aiming to provide new perspectives for research in this area from the micro level.

3. Theoretical Analysis and Research Hypotheses

First, the stakeholder theory highlights that implementing ESG behaviors by enterprises makes the communication between enterprises and stakeholders more effective, which is conducive to forming stable and lasting relationships [2] and provides the necessary prerequisites for enterprises to improve the sustainability of surplus. Good ESG performance sends positive signals to stakeholders, which is conducive to reducing the transaction costs and agency costs of enterprises, improving operational efficiency, and increasing the value of enterprises [53]. Secondly, the principal-agent theory states that there is information asymmetry between firms and stakeholders, which makes investors less confident in the long-term operation of firms. [54]. Since companies that fulfill ESG responsibilities are more inclined to build long-term relationships, they will work to alleviate the information asymmetry problem [55]. By fulfilling ESG responsibilities, companies convey non-financial information to stakeholders, which is not only a useful supplement to traditional financial information but also satisfies the information needs of outsiders, so that stakeholders can have a comprehensive understanding of the company’s situation, reducing the degree of surplus volatility. In addition, higher ESG ratings enable enterprises to form stronger reputation protection mechanisms [16], which leads stakeholders to demand a lower risk premium from enterprises, reducing business risks [56] and debt financing costs [57], and improving the stability of corporate surplus.

From the perspective of the corporate social (S) responsibility level, undertaking social responsibility has a positive effect on enhancing the surplus sustainability of enterprises. By undertaking social performance, enterprises send positive signals to the outside world, which not only increases the transparency of transactions but also greatly enhances the reputation and social influence of enterprises [16]. Reputation enhancement helps to increase the investment confidence of investors and provides a solid guarantee for the development of the enterprise [58]. In addition, good social performance can also help build a harmonious government–enterprise relationship and enhance the social status of enterprises [59]. In addition, good social performance can also lead to a harmonious government–enterprise relationship and enhance the social status of enterprises [60], especially when the external environment encounters challenges. Due to the solid cooperative relationship and trust foundation established between enterprises and stakeholders, these stakeholders will provide the necessary support for enterprises [56], effectively mitigating the negative impacts and surplus fluctuations faced by production and operation, and enhancing enterprise value [13].

From the perspective of corporate governance (G) in enterprises, assuming and strengthening the responsibility of corporate governance plays a significant role in enhancing surplus sustainability. Firstly, by optimizing the organizational structure and business processes, improving the level of governance, and improving incentives and constraint mechanisms, the company can significantly reduce financing costs [61] and maintain the level of corporate surplus. Secondly, improving the level of corporate governance closely integrates the interests of managers and the overall interests of enterprises, effectively reducing agency costs [62], and enhancing the sustainable profitability of the enterprises. In addition, improving the level of corporate governance also helps enterprises realize the rational distribution of control, improve the efficiency of decision-making, and reduce transaction costs [63], ultimately showing robustness in the accounting surplus of enterprises.

However, in the short term, the environmental (E) performance of the enterprise will reduce the sustainability of the enterprise’s surplus. Firstly, when enterprises improve their environmental performance, they often need to invest a large amount of money into the research and development of new technologies, as well as purchase environmental protection equipment, etc. [14]. These behaviors have obvious positive externalities; that is, the enterprise incurs costs but may not be able to obtain a return, resulting in a short-term effect of the enterprise’s income not rising but rather falling [64,65], which affects the enterprise’s accounting surplus. Secondly, it takes a long time for the results of environmental improvement projects to be realized, and it is difficult to achieve significant cost reductions or revenue increases for the enterprise in the short term [66], so it may hurt the short-term surplus of the enterprise. Again, although stakeholders’ concerns about environmental performance have increased, market acceptance is still an important factor. If firms invest large amounts of resources to improve their environmental performance but it is difficult to obtain a corresponding return in the market, then the short-term surplus of firms will be affected. Finally, there is a high likelihood of changes in government policies on the environment. If a change in government policy fails to obtain the expected return on the resources invested in improving environmental performance, this will affect the sustainability of the short-term surplus of the enterprise. In summary, the following hypotheses are proposed in this paper:

H1a: 

Firms that improve their ESG performance and social and governance dimensions will improve their surplus sustainability.

H1b: 

In the short term, a firm’s practices on environmental dimensions will reduce surplus sustainability.

4. Research Design

4.1. Sample Selection and Data Sources

In this paper, as the research sample, we selected A-share-listed companies from Shanghai and Shenzhen from 2010 to 2022, and data came from the Cathay Pacific and Wind databases. There were 42,875 observations from 4852 listed companies during the sample period. After removing the samples with missing indicators, excluding ST samples, financial enterprises samples, and samples with missing data, and shrinking the main variables by 1% up and dow n, there were 24,929 observations from 3321 listed companies.

4.2. Measurement Model

To test H1a and H1b, this paper constructs the following model:

ES_i,t = β₀+ β₁ESG_i,t/S_i,t/G_i,t + β₂Lev_i,t + β₃Ppe_i,t + β₄Indb_i,t + β₅Top1_i,t + β₆Intang_i,t + β₇Growth_i,t
+ β₈Age_i,t + ∑Industry + ∑Year + ε_i,t

(1)

ES_i,t = δ₀+ δ₁E_i,t + δ₂Lev_i,t + δ₃Ppe_i,t + δ₄Indb_i,t + δ₅Top1_i,t + δ₆Intang_i,t + δ₇Growth_i,t
+ δ₈Age_i,t + ∑Industry + ∑Year + ε_i,t

(2)

where i denotes individual, t denotes year, β₀ denotes the constant term, β_i denotes the regression coefficient of each variable, ε denotes the random disturbance term, the explanatory variable (ES_i,t) denotes the surplus sustainability, and the explanatory variables (ESG_i,t, E_i,t, S_i,t, G_i,t) denote the performances of the ESG of firms, as well as their environmental, social, and corporate governance dimensions, respectively, controlling for the year and industry fixed effects. If the empirical results show that β₁ is positive, then H1a is proved, i.e., the firm’s improved performance in ESG and its social and governance dimensions will enhance the firm’s surplus persistence; if $\delta$₁ is negative, then H1b is proved, i.e., the firm’s environmental dimension practices will reduce the firm’s surplus persistence in the short run.

4.3. Variable Definition

(1) Explained variable: Corporate surplus persistence (ES). This paper refers to Xiao Hua et al.’s [67] study of the profit level of the company and selects the profit margin of the main business to measure the profitability of the enterprise (CROA). Drawing on the current internationally recognized corporate surplus sustainability (ES) measurement method, the measurement model is set up as follows:

CROA_i,t+1= θ₀+ θ₁CROA_i,t + μ_i,t

(3)

where CROA_i,t+1 denotes the accounting surplus of the company in the coming year; CROA_i,t denotes the accounting surplus of the company in the current year. In this paper, we use the return on main business assets to represent the accounting surplus and the regression coefficient of $\theta$₁ denotes the surplus continuity of the company.

(2) Explanatory variables: Corporate ESG performance (ESG). Given that the CSI ESG evaluation system has the advantages of fast updating, wide coverage, and high reliability, and is closer to the reality in China, this paper draws on the research results of Gao Jieying et al. [68] and utilizes the CSI index to study the scores of each component of the environmental, social, corporate governance, and overall ESG performance.

(3) Control variables: Based on the established research [18], this paper takes the gearing ratio (Lev), fixed asset intensity (Ppe), proportion of sole director (Indb), equity concentration (Top1), intangible asset intensity (Intang), firm growth ability (Growth), and firm age (Age) as control variables, and controls for industry and year fixed effects. The specific measures are shown in

Table 1. Variable definition table.

Type of Variable	Variable Name	Variable Symbol	Variable Metric
Explained variable	Corporate surplus sustainability	ES	Calculated by Equation (3)
Explanatory variable	Enterprise ESG performance	ENV SOC GOV ESG	China card ESG rating score/100
Controlled variable	Asset–liability ratio	Lev	The ratio of ending total liabilities to total assets
	Fixed asset intensity	Ppe	The ratio of net fixed assets to total assets at the end of the period
	Independent director ratio	Indb	The number of independent directors accounts for the number of all directors
	Equity concentration	Top1	The largest shareholder holds the proportion of the total number of shares
	Intangible asset density	Intang	The ratio of the net intangible assets to the total assets at the end of the period
	Enterprise growth ability	Growth	increase rate of business revenue
	enterprise age	Age	And ln (fiscal year − establishment year + 1)
	Trade	Industry	Virtual variables representing the industry
	a particular year	Year	Virtual variables representing the year

.

5. Empirical Results and Analysis

5.1. Descriptive Statistics

As shown in

Table 2. Descriptive statistics.

Variable	Sample Capacity	Average	Standard Error	Least Value	Median	Crest Value
ES	24,929	0.064	0.042	−0.002	0.035	0.054
ESG	24,929	0.732	0.049	0.572	0.703	0.734
E	24,929	0.610	0.072	0.457	0.563	0.608
S	24,929	0.749	0.094	0.463	0.696	0.756
G	24,929	0.788	0.065	0.530	0.760	0.800
INVH	24,929	0.460	0.243	0.005	0.278	0.477
Liability	24,929	0.020	0.014	0.000	0.008	0.019
Lev	24,929	0.454	0.192	0.051	0.306	0.451
Ppe	24,929	0.221	0.161	0.002	0.094	0.189
I ndb	24,929	0.382	0.073	0.250	0.333	0.364
Top1	24,929	0.338	0.148	0.0860	0.316	0.747
Intang	24,929	0.048	0.053	0.000	0.018	0.034
Growth	24,929	0.159	0.365	−0.552	−0.025	0.103
Age	24,929	2.960	0.303	1.792	2.773	2.996

, the mean and median values of the surplus sustainability (ES) of the sample companies are 0.064 and 0.035, respectively, indicating that the surplus sustainability of the sample companies is generally lower and there is more room for improvement. The mean and median values of the CSI ESG composite score (ESG) are 0.732 and 0.703, and the standard deviation is 0.049, indicating that the ESG level of the sample firms is medium-high overall, and the difference in ESG performance between the samples is small, with room for improvement. Among them, the environmental (E), social (S), and corporate governance (G) performances have the highest mean (0.788) and the smallest standard deviation (0.065), indicating that there are large differences in the environmental, social, and corporate governance performances of the sample firms, and the sample firms have better corporate governance performances compared to the environmental and social factors.

5.2. Correlation Analysis

As can be seen from the test results in

Table 3. Correlation analysis of the main variables.

	ES1	ESG	INVH	Liability	Lev	Ppe	Indb	Top1	Intang	Growth	Age
ES1	1
ESG	0.084 ***	1
INVH	0.001	0.114 ***	1
Liability	−0.237 ***	−0.142 ***	0.017 ***	1
Lev	−0.267 ***	−0.035 ***	0.206 ***	0.350 ***	1
Ppe	−0.081 ***	−0.064 ***	0.147 ***	0.321 ***	0.046 ***	1
Indb	0.042 ***	0.075 ***	−0.103 ***	−0.033 ***	−0.057 ***	−0.050 ***	1
Top1	−0.019 ***	0.085 ***	0.545 ***	−0.045 ***	0.091 ***	0.110 ***	−0.003	1
Intang	0.001	−0.036 ***	0.059 ***	0.133 ***	−0.023 ***	0.061 ***	−0.028 ***	0.028 ***	1
Growth	0.103 ***	0.002	0.055 ***	0.003	0.029 ***	−0.040 ***	−0.00200	0.012 *	0.002	1
Age	−0.076 ***	0	0.006	−0.056 ***	0.085 ***	−0.036 ***	−0.057 ***	−0.102 ***	−0.020 ***	−0.078 ***	1

Note: * and *** denote significant at 10% and 1% levels, respectively.

, the core explanatory variables’ corporate ESG performance and corporate surplus sustainability (ES) are significantly positive at the 1% level, which preliminarily verifies Hypothesis H1. In addition, most of the correlation coefficients of the main variables are less than 0.5, which indicates that the variables selected in this paper are reasonable, and the model does not suffer from serious multicollinearity.

5.3. Main Effects Regression Analysis

Table 4. Impact of a firm’s ESG performance on surplus persistence.

	(1)	(2)	(3)	(4)
	ES
ESG	0.069 ***
	(0.005)
E		−0.006 *
		(0.004)
S			0.039 ***
			(0.003)
G				0.039 ***
				(0.004)
Lev	−0.036 ***	−0.037 ***	−0.038 ***	−0.034 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Ppe	−0.027 ***	−0.027 ***	−0.026 ***	−0.028 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Indb	0.006 *	0.010 ***	0.009 ***	0.006 *
	(0.003)	(0.003)	(0.003)	(0.003)
Top1	0.012 ***	0.015 ***	0.015 ***	0.012 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Intang	0.007	0.007	0.006	0.008 *
	(0.004)	(0.004)	(0.004)	(0.004)
Growth	0.012 ***	0.012 ***	0.012 ***	0.012 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Age	−0.005 ***	−0.005 ***	−0.004 ***	−0.005 ***
	(0.001)	(0.001)	(0.001)	(0.001)
industry effect	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES
C	0.029 ***	0.080 ***	0.051 ***	0.045 ***
	(0.005)	(0.004)	(0.004)	(0.005)
N	24,929	24,929	24,929	24,929
R2	0.218	0.212	0.218	0.215
adj. R2	0.217	0.210	0.216	0.214

Note: Robust white-robust-adjusted standard errors in parentheses; * and *** indicate significance at the 10% and 1% levels, respectively.

shows the regression results of estimating model (1) and model (2). The results in columns (1), (3), and (4) show that the regression coefficients of corporate ESG and its S and G dimensions are significantly positive, indicating that corporate ESG performance is positively related to surplus sustainability, reflecting that the fulfillment of corporate responsibility for ESG may be supported by stakeholders, and receive stable financial support and income sources (and, thus, H1a is verified). Meanwhile, the results in column (2) show that a firm’s environmental (E) performance is significantly and negatively related to its surplus sustainability (and H1b is verified). This result is probably related to the design of CSI’s rating indicator system. Specifically, when assessing environmental indicators, the CSI’s ESG ratings focus on resource utilization efficiency, emission management measures, and ecological protection achievements, which often reflect the costs borne by companies in the current business cycle or the milestones achieved in the field of environmental protection. However, since these indicators make it difficult to comprehensively measure the balance between environmental costs and investment returns in the long run, a firm’s environmental (E) performance is negatively correlated with the sustainability of its surpluses.

5.4. Mechanism Analysis

5.4.1. Cost of Debt Financing

A firm’s debt financing costs mediate the relationship between a firm’s ESG performance, its social and governance dimensions, and surplus sustainability. First, from the perspective of ESG performance, firms with good ESG performance tend to have higher information transparency, which alleviates the information asymmetry between firms and creditors [69]. According to the principal-agent theory, improved information transparency helps reduce adverse selection and moral hazard, enabling creditors to more accurately assess the risk level of the enterprise, which in turn reduces the cost of debt financing [9]. At the same time, improving the level of ESG performance can lead to reputational capital for the enterprise, attract more support from stakeholders, enhance the enterprise’s market position [70], gradually increase the scale of capital, and improve the availability of capital [71]. When the cost of debt financing of the enterprise is reduced, the financial burden of the enterprise reduces, which helps the enterprise maintain a stable level of surplus and improve surplus sustainability.

Secondly, from the point of view of corporate social performance (S), the active commitment to social responsibility is conducive to alleviating financing constraints. Corporate social responsibility can influence the regulatory review of corporate refinancing applications by obtaining government policy support, as well as making it easier for enterprises to obtain financial support, considering that Chinese banks are mainly state-owned. At the same time, the fulfillment of social responsibilities by enterprises helps establish a good social image, which helps in winning the trust and support of external investors, to obtain funds at lower costs, reducing the cost of debt financing [40]. In addition, corporate social responsibility information disclosure can allow creditors to better judge the company’s future revenues, costs, risks, and performance through non-financial reporting, reducing their uncertainty about the company’s solvency [72], lowering the demand for compensation for corporate risk premiums, and reducing the cost of debt financing [73].

Finally, from the point of view of enterprise corporate governance (G) performance, a perfect governance structure of the enterprise can reduce the information asymmetry problem in the principal-agent relationship, reduce the agency cost, and improve the transparency and credibility of the enterprise [74]. Corporate governance essentially embodies a system of power distribution and checks and balances. Enterprises fulfill their corporate governance responsibilities more by authorizing external investors, increasing effective supervision of the enterprise, and reducing the possibility of opportunism through checks and balances of power with management, thus easing the principal-agent relationship and reducing agency costs. A high level of corporate governance means that the internal management incentives and constraints are more effective, prompting management to be more diligent and responsible [75]; this improves investor confidence, lowers the required rate of return, reduces the cost of financing, improves the efficiency of resource allocation [76], and improves the sustained profitability of the enterprise.

To verify the above analysis, the following model is designed in this paper:

ES_i,t = β₀+ β₁ESG_i,t/S_i,t/G_i,t + β₂Lev_i,t + β₃Ppe_i,t + β₄Indb_i,t + β₅Top1_i,t + β₆Intang_i,t + β₇Growth_i,t
+ β₈Age_i,t + ∑Industry + ∑Year + ε_i,t

(4)

Liability_i,t = α₀+ α₁ESG_i,t/S_i,t/G_i,t + α₂Lev_i,t + α₃Ppe_i,t + α₄Indb_i,t + α₅Top1_i,t + α₆Intang_i,t +
α₇Growth_i,t + α₈Age_i,t + ∑Industry + ∑Year + ε_i,t

(5)

ES_i,t = γ₀ + γ₁ESG_i,t/S_i,t/G_i,t + γ₂Liability_i,t + γ₃Lev_i,t + γ₄Ppe_i,t + γ₅Indb_i,t + γ₆Top1_i,t + γ₇Intang_i,t +
γ₈Growth_i,t + γ₉Age_i,t + ∑Industry + ∑Year + ε_i,t

(6)

In model (4) the structure is the same as model (1); Liability_i,t in model (5) is the mediating variable, which is measured by the ratio of the interest expense line item in finance costs to the average total liabilities of the firm, following the practice of Guangzi Li [77]. The effects of a firm’s ESG performance on the cost of debt financing in models (3)–(5) are shown in

Table 5. Mediating role of debt financing costs.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
	ES	Liability	ES	ES	Liability	ES	ES	Liability	ES
ESG	0.069 ***	−0.027 ***	0.055 ***
	(0.005)	(0.002)	(0.005)
S				0.039 ***	−0.008 ***	0.035 ***
				(0.003)	(0.001)	(0.003)
G							0.039 ***	−0.025 ***	0.025 ***
							(0.004)	(0.001)	(0.004)
Liability			−0.539 ***			−0.548 ***			−0.546 ***
			(0.020)			(0.020)			(0.021)
Lev	−0.036 ***	0.026 ***	−0.022 ***	−0.038 ***	0.027 ***	−0.023 ***	−0.034 ***	0.024 ***	−0.020 ***
	(0.001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.001)
Ppe	−0.027 ***	0.020 ***	−0.016 ***	−0.026 ***	0.020 ***	−0.015 ***	−0.028 ***	0.021 ***	−0.016 ***
	(0.002)	(0.001)	(0.002)	(0.002)	(0.001)	(0.002)	(0.002)	(0.001)	(0.002)
Indb	0.006 *	0.003 ***	0.008 **	0.009 ***	0.002 **	0.010 ***	0.006 *	0.004 ***	0.008 **
	(0.003)	(0.001)	(0.003)	(0.003)	(0.001)	(0.003)	(0.003)	(0.001)	(0.003)
Top1	0.012 ***	0.795 ***	−0.003	0.015 ***	0.808 ***	−0.002	0.012 ***	0.787 ***	−0.003
	(0.002)	(0.008)	(0.002)	(0.002)	(0.008)	(0.002)	(0.002)	(0.008)	(0.002)
Intang	0.007	0.026 ***	0.021 ***	0.006	0.026 ***	0.020 ***	0.008 *	0.025 ***	0.022 ***
	(0.004)	(0.002)	(0.004)	(0.004)	(0.002)	(0.004)	(0.004)	(0.002)	(0.004)
Growth	0.012 ***	0.000	0.012 ***	0.012 ***	0.000	0.012 ***	0.012 ***	0.000	0.012 ***
	(0.001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.001)
Age	−0.005 ***	−0.001 ***	−0.005 ***	−0.004 ***	−0.001 ***	−0.005 ***	−0.005 ***	−0.001 **	−0.005 ***
	(0.001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.001)
industry effect	YES	YES	YES	YES	YES	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES	YES	YES	YES	YES	YES
C	0.029 ***	0.033 ***	0.047 ***	0.051 ***	0.020 ***	0.062 ***	0.045 ***	0.035 ***	0.064 ***
	(0.005)	(0.002)	(0.005)	(0.004)	(0.001)	(0.004)	(0.005)	(0.002)	(0.005)
N	24,929	24,929	24,929	24,929	24,929	24,929	24,929	24,929	24,929
R2	0.218	0.309	0.240	0.218	0.303	0.241	0.215	0.313	0.238
adj. R2	0.217	0.308	0.239	0.216	0.302	0.240	0.214	0.311	0.236

Note: Robust white-robust-adjusted standard errors in parentheses; *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

. The results in columns (2), (5), and (8) show that the performance of a firm’s ESG and its S and G dimensions are significantly negatively related to a firm’s debt financing cost (Liability) at a 1% confidence level, which implies that the debt financing cost (Liability) can be reduced by improving the performance of ESG and its S and G dimensions. In addition, columns (3), (6), and (9) show that the cost of debt financing (Liability) plays a mediating role in the relationship between ESG performance, corporate social performance (S), corporate governance performance (G), and corporate surplus sustainability; thus, the above analysis is validated.

5.4.2. Institutional Investor Shareholding

There is a close relationship between the shareholding ratio of institutional investors and the ESG performance of firms. First, firms with good ESG performance tend to have higher information transparency [52], which helps to reduce the information asymmetry between institutional investors and firms, thus reducing agency costs. Institutional investors with long-term investment perspectives attach more importance to the ESG performance of enterprises and tend to invest in enterprises with excellent performance in this regard. Therefore, with improved ESG performance, the proportion of institutional investors’ shareholding increases accordingly. At the same time, the monitoring and governance abilities of institutional investors have a positive impact on the sustainability of corporate surplus; through participation in corporate governance, institutional investors can make enterprises adopt more robust business strategies to achieve long-term stable surplus [78]. Specific to the three dimensions of ESG, improving the S (social) dimension can significantly enhance the social reputations of enterprises [16], reduce information asymmetry, attract more institutional investors with ESG investment concepts, and optimize surplus sustainability. Improving the G (governance) dimension can help reduce information asymmetry between enterprises and institutional investors, enhance investor confidence, attract long-term investors, improve corporate governance through the monitoring role of institutional investors [79], stabilize the stock price and market expectations, and optimize surplus sustainability. However, improving the E (environmental) dimension may not increase institutional investors’ shareholding of the enterprise, and it is difficult to optimize the surplus sustainability of enterprises. This is mainly because institutional investors pay more attention to financial performance, governance structure, and the long-term investment potential of firms when evaluating firms, while environmental performance may not be the primary factor in their decision-making. In addition, the value of environmental performance has not yet been fully harmonized in the market, which undermines the importance that institutional investors place on environmental performance.

To verify the above analysis, the following model is designed in this paper:

ES_i,t = β₀+ β₁ESG_i,t/S_i,t/G_i,t + β₂Lev_i,t + β₃Ppe_i,t + β₄Indb_i,t + β₅Top1_i,t + β₆Intang_i,t + β₇Growth_i,t
+ β₈Age_i,t + ∑Industry + ∑Year + ε_i,t

(7)

INVH_i,t = α₀+ α₁ESG_i,t/S_i,t/G_i,t + α₂Lev_i,t + α₃Ppe_i,t + α₄Indb_i,t + α₅Top1_i,t + α₆Intang_i,t +
α₇Growth_i,t + α₈Age_i,t + ∑Industry + ∑Year + ε_i,t

(8)

ES_i,t = γ₀+ γ₁ESG_i,t/S_i,t/G_i,t + γ₂INVH_i,t + γ₃Lev_i,t + γ₄Ppe_i,t + γ₅Indb_i,t + γ₆Top1_i,t + γ₇Intang_i,t +
γ₈Growth_i,t + γ₉Age_i,t + ∑Industry + ∑Year + ε_i,t

(9)

where model (7) has the same structure as model (1); INVH_i,t in model (8) denotes the mediating variable, representing the proportion of institutional investor shareholding of firm i in year t. The effects of a firm’s ESG performance on the institutional investors’ shareholding ratio in models (3)–(5) are shown in

Table 6. Intermediation of institutional investors’ holdings.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
	ES	INVH	ES	ES	INVH	ES	ES	INVH	ES
ESG	0.069 ***	0.454 ***	0.061 ***
	(0.005)	(0.025)	(0.005)
S				0.039 ***	0.073 ***	0.038 ***
				(0.003)	(0.014)	(0.003)
G							0.039 ***	0.379 ***	0.032 ***
							(0.004)	(0.020)	(0.004)
INVH			0.019 ***			0.020 ***			0.020 ***
			(0.001)			(0.001)			(0.001)
Lev	−0.036 ***	0.146 ***	−0.038 ***	−0.038 ***	0.137 ***	−0.041 ***	−0.034 ***	0.168 ***	−0.037 ***
	(0.001)	(0.007)	(0.001)	(0.001)	(0.007)	(0.001)	(0.001)	(0.007)	(0.001)
Ppe	−0.027 ***	0.071 ***	−0.029 ***	−0.026 ***	0.073 ***	−0.028 ***	−0.028 ***	0.067 ***	−0.029 ***
	(0.002)	(0.009)	(0.002)	(0.002)	(0.009)	(0.002)	(0.002)	(0.009)	(0.002)
Indb	0.006 *	−0.250 ***	0.011 ***	0.009 ***	−0.229 ***	0.014 ***	0.006 *	−0.265 ***	0.011 ***
	(0.003)	(0.017)	(0.003)	(0.003)	(0.017)	(0.003)	(0.003)	(0.017)	(0.003)
Top1	0.012 ***	0.795 ***	−0.003	0.015 ***	0.808 ***	−0.002	0.012 ***	0.787 ***	−0.003
	(0.002)	(0.008)	(0.002)	(0.002)	(0.008)	(0.002)	(0.002)	(0.008)	(0.002)
Intang	0.007	0.087 ***	0.005	0.006	0.085 ***	0.004	0.008 *	0.094 ***	0.006
	(0.004)	(0.024)	(0.004)	(0.004)	(0.024)	(0.004)	(0.004)	(0.024)	(0.004)
Growth	0.012 ***	0.031 ***	0.012 ***	0.012 ***	0.031 ***	0.011 ***	0.012 ***	0.031 ***	0.012 ***
	(0.001)	(0.003)	(0.001)	(0.001)	(0.003)	(0.001)	(0.001)	(0.003)	(0.001)
Age	−0.005 ***	0.075 ***	−0.006 ***	−0.004 ***	0.075 ***	−0.005 ***	−0.005 ***	0.071 ***	−0.006 ***
	(0.001)	(0.005)	(0.001)	(0.001)	(0.005)	(0.001)	(0.001)	(0.005)	(0.001)
industry effect	YES	YES	YES	YES	YES	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES	YES	YES	YES	YES	YES
C	0.029 ***	−0.264 ***	0.034 ***	0.051 ***	0.000	0.051 ***	0.045 ***	−0.256 ***	0.050 ***
	(0.005)	(0.026)	(0.005)	(0.004)	(0.022)	(0.004)	(0.005)	(0.025)	(0.005)
N	24,929	24,929	24,929	24,929	24,929	24,929	24,929	24,929	24,929
R2	0.218	0.384	0.225	0.218	0.377	0.226	0.215	0.385	0.223
adj. R2	0.217	0.383	0.224	0.216	0.376	0.225	0.214	0.384	0.221

Note: Robust white-robust-adjusted standard errors in parentheses; * and *** indicate significance at the 10% and 1% levels, respectively.

. The results in columns (2), (5), and (8) show that the performance of a firm’s ESG and its S and G dimensions are significantly positively related to the proportion of institutional investors’ shareholding (INVH) with a 1% confidence level, which implies that the proportion of institutional investors’ shareholding (INVH) can be enhanced by improving the performance of ESG and its S and G dimensions. In addition, columns (3), (6), and (9) show that the institutional investors’ shareholding ratio (INVH) plays a mediating role in the relationship between ESG performance, corporate social (S) performance, corporate governance (G) performance, and corporate surplus sustainability.

5.5. Robustness Check

5.5.1. Substitution of Explanatory Variables

This paper draws on the method of Dou Huan and Lu Zhengfei [80] and takes the net profit margin as a substitute variable for the profit margin of the main business, which measures the surplus sustainability of enterprises in Equation (4) and re-performs autoregression to calculate the new regression coefficient (ES2); the test results are shown below. The test results in columns (1) to (4) of

Table 7. Replacement of explanatory variables.

	(1)	(2)	(3)	(4)
	ES2
ESG	0.046 ***
	(0.003)
E		−0.004 *
		(0.002)
S			0.026 ***
			(0.002)
G				0.026 ***
				(0.003)
Lev	−0.024 ***	−0.024 ***	−0.025 ***	−0.022 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Ppe	−0.018 ***	−0.018 ***	−0.018 ***	−0.018 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Indb	0.004 *	0.006 ***	0.006 ***	0.004 *
	(0.002)	(0.002)	(0.002)	(0.002)
Top1	0.008 ***	0.010 ***	0.010 ***	0.008 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Intang	0.005	0.005	0.004	0.005 *
	(0.003)	(0.003)	(0.003)	(0.003)
Growth	0.008 ***	0.008 ***	0.008 ***	0.008 ***
	(0.000)	(0.001)	(0.000)	(0.000)
Age	−0.003 ***	−0.003 ***	−0.003 ***	−0.003 ***
	(0.001)	(0.001)	(0.001)	(0.001)
industry effect	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES
C	0.023 ***	0.057 ***	0.037 ***	0.034 ***
	(0.003)	(0.003)	(0.003)	(0.003)
N	24,929	24,929	24,929	24,929
R2	0.218	0.212	0.218	0.215
adj. R2	0.217	0.210	0.216	0.214

Note: Robust white-robust-adjusted standard errors in parentheses; * and *** indicate significance at the 10% and 1% levels, respectively.

confirm that corporate ESG and its S and G performances have a positive effect on corporate surplus sustainability while improving the performance of the E dimension reduces corporate surplus sustainability; H1a and H1b are verified again.

5.5.2. Lagged Explanatory Variables

Benchmark regression results show that corporate ESG performance is positively related to surplus sustainability; this may be because improvements in surplus sustainability enable firms to improve their ESG levels, leading to an endogeneity problem due to bidirectional causality, which interferes with the study. To alleviate this endogeneity, this paper further lags the explanatory variables by one period and two periods, respectively. The test results in

Table 8. Explanatory variables lagged by 1 period.

	(1)	(2)	(3)	(4)
	ES
L.ESG	0.050 ***
	(0.005)
L.E		−0.010 **
		(0.004)
L.S			0.034 ***
			(0.003)
L.G				0.027 ***
				(0.004)
Lev	−0.035 ***	−0.035 ***	−0.037 ***	−0.034 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Ppe	−0.026 ***	−0.025 ***	−0.025 ***	−0.026 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Indb	0.007 **	0.010 ***	0.009 **	0.007 **
	(0.004)	(0.004)	(0.004)	(0.004)
Top1	0.012 ***	0.014 ***	0.014 ***	0.012 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Intang	0.008 *	0.009 *	0.007	0.009 *
	(0.005)	(0.005)	(0.005)	(0.005)
Growth	0.012 ***	0.012 ***	0.012 ***	0.012 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Age	−0.005 ***	−0.005 ***	−0.004 ***	−0.005 ***
	(0.001)	(0.001)	(0.001)	(0.001)
industry effect	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES
C	0.038 ***	0.077 ***	0.049 ***	0.050 ***
	(0.005)	(0.005)	(0.004)	(0.005)
N	20,789	20,789	20,789	20,789
R2	0.216	0.212	0.217	0.214
adj. R2	0.214	0.211	0.216	0.212

Note: Robust white-robust-adjusted standard errors in parentheses; *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

and

Table 9. Explanatory variables lagged by 2 periods.

	(1)	(2)	(3)	(4)
	ES
L2.ESG	0.034 ***
	(0.005)
L2.E		−0.012 ***
		(0.004)
L2.S			0.030 ***
			(0.003)
L2.G				0.020 ***
				(0.004)
Lev	−0.033 ***	−0.033 ***	−0.034 ***	−0.033 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Ppe	−0.024 ***	−0.023 ***	−0.023 ***	−0.024 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Indb	0.007 *	0.009 **	0.008 **	0.007 *
	(0.004)	(0.004)	(0.004)	(0.004)
Top1	0.013 ***	0.014 ***	0.014 ***	0.012 ***
	(0.002)	(0.002)	(0.002)	(0.002)
Intang	0.008	0.009*	0.007	0.009 *
	(0.005)	(0.005)	(0.005)	(0.005)
Growth	0.012 ***	0.012 ***	0.012 ***	0.012 ***
	(0.001)	(0.001)	(0.001)	(0.001)
Age	−0.005 ***	−0.005 ***	−0.004 ***	−0.005 ***
	(0.001)	(0.001)	(0.001)	(0.001)
industry effect	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES
C	0.050 ***	0.080 ***	0.054 ***	0.057 ***
	(0.006)	(0.005)	(0.005)	(0.006)
N	17,741	17,741	17,741	17,741
R2	0.214	0.212	0.216	0.213
adj. R2	0.212	0.211	0.214	0.211

Note: Robust white-robust-adjusted standard errors in parentheses; *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

show that the results are consistent with the main effects, and H1a and H1b are still valid.

5.6. Further Analysis

5.6.1. Analysis of Regional Heterogeneity

Existing studies show that the level of marketization in the eastern region of China is significantly higher than in the central and western regions. With the higher level of economic development in the eastern region, enterprises have more capital to invest in the research and development of green products, thus enhancing the ability of sustainable development. At the same time, companies in the eastern region have a stronger sense of environmental responsibility, which is conducive to strengthening the effect of corporate environmental performance on surplus sustainability. In the eastern region with a high degree of marketization, the government has less intervention and greater autonomy, so it does not need to invest a lot of money and energy to maintain a good relationship with the government, but rather focuses on satisfying the interests of other stakeholders, thus enhancing the impact of social responsibility on surplus sustainability. In the eastern region, where the legal system is more perfect, there are fewer cases of employees’ interests being jeopardized and executives being opportunistic; enterprises will improve the truthfulness of information disclosure to avoid being punished. So, stakeholders will give more positive responses, and enterprises will take the initiative to fulfill the responsibility of corporate governance, which is more likely to contribute to the sustainable development of enterprises. Based on this, this paper further divides the sample enterprises into eastern and western sample groups, according to different regions, and examines the influences of regions on the relationship between corporate ESG performance and corporate surplus sustainability.

As shown in

Table 10. Tests for regional heterogeneity.

	ES
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Western Region	Eastern Region	Western Region	Eastern Region	Western Region	Eastern Region	Western Region	Eastern Region
ESG	0.026 *	0.077 ***
	(0.014)	(0.006)
E			−0.015	−0.003
			(0.010)	(0.004)
S					0.028 ***	0.041 ***
					(0.008)	(0.003)
G							0.005	0.046 ***
							(0.011)	(0.005)
Coefficient of variation between groups	9.36 ***		1.31		1.81		9.87 ***
Lev	−0.033 ***	−0.031 ***	−0.032 ***	−0.032 ***	−0.033 ***	−0.033 ***	−0.033 ***	−0.029 ***
	(0.004)	(0.002)	(0.004)	(0.002)	(0.004)	(0.002)	(0.004)	(0.002)
Ppe	−0.036 ***	−0.031 ***	−0.035 ***	−0.031 ***	−0.035 ***	−0.030 ***	−0.036 ***	−0.031 ***
	(0.005)	(0.002)	(0.005)	(0.002)	(0.005)	(0.002)	(0.005)	(0.002)
Indb	0.021 **	0.004	0.023 **	0.007 *	0.022 **	0.007 *	0.023 **	0.003
	(0.010)	(0.004)	(0.010)	(0.004)	(0.010)	(0.004)	(0.010)	(0.004)
Top1	−0.000	0.012 ***	−0.000	0.015 ***	0.000	0.015 ***	−0.000	0.011 ***
	(0.005)	(0.002)	(0.005)	(0.002)	(0.005)	(0.002)	(0.005)	(0.002)
Intang	0.023*	0.003	0.023*	0.005	0.023*	0.002	0.023*	0.005
	(0.013)	(0.006)	(0.013)	(0.006)	(0.013)	(0.006)	(0.013)	(0.006)
Growth	0.013 ***	0.011 ***	0.013 ***	0.012 ***	0.013 ***	0.011 ***	0.013 ***	0.011 ***
	(0.002)	(0.001)	(0.002)	(0.001)	(0.002)	(0.001)	(0.002)	(0.001)
Age	−0.002	−0.006 ***	−0.002	−0.006 ***	−0.001	−0.006 ***	−0.002	−0.007 ***
	(0.003)	(0.001)	(0.003)	(0.001)	(0.003)	(0.001)	(0.003)	(0.001)
industry effect	YES	YES	YES	YES	YES	YES	YES	YES
vintage effect	YES	YES	YES	YES	YES	YES	YES	YES
C	0.038 **	0.027 ***	0.065 ***	0.082 ***	0.036 ***	0.053 ***	0.052 ***	0.044 ***
	(0.015)	(0.006)	(0.013)	(0.005)	(0.012)	(0.005)	(0.014)	(0.006)
N	2868	17,296	2868	17,296	2868	17,296	2868	17,296
R2	0.280	0.216	0.279	0.208	0.282	0.214	0.279	0.212
adj. R2	0.270	0.214	0.269	0.206	0.272	0.213	0.269	0.210

Note: Robust white-robust-adjusted standard errors in parentheses; *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

, the contribution of corporate ESG and corporate governance (G) performance to corporate surplus sustainability is more significant in the eastern region, while the performances of the environmental (E) and social responsibility (S) dimensions are not significant. In the eastern region, the positive effect of corporate governance (G) on corporate surplus sustainability is more significant due to the existence of more mature capital markets, stricter regulatory environments, and higher investor expectations. This suggests that good corporate governance practices are particularly important in these regions to maintain a firm’s long-term profitability and stabilize stock prices. However, the environmental (E) and social responsibility (S) dimensions do not have a significant impact on corporate surplus sustainability. This may be because investments in these dimensions have not yet been translated into financial returns and that investors or the market have paid relatively little attention to environmental and social responsibilities, so the performance of these dimensions has not significantly affected the share price or profitability of companies. This does not mean that environmental and social responsibilities are not important, but rather that their impact on the sustainability of corporate surpluses has not been fully realized in the current market environment and data conditions.

5.6.2. Long-Term Effects of Performance Enhancement in Environmental Dimensions on Corporate Surplus Persistence

In the previous analysis, it was found that improving a firm’s environmental (E) dimension will reduce a firm’s surplus sustainability in the short run, and this paper investigates whether this negative relationship exists in the long run. Therefore, this paper further constructs the following model to measure the quadratic relationship between the environmental (E) dimension and surplus persistence:

ES_i,t = δ₀+ δ₁E_i,t + δ₂E²_i,t + δ₃Lev_i,t + δ₄Ppe_i,t + δ₅Indb_i,t + δ₆Top1_i,t + δ₇Intang_i,t + δ₈Growth_i,t + δ₉Age_i,t + ∑Industry + ∑Year + ε_i,t

(10)

In

Table 11. Long-term effects test.

	(1)	(2)
	ES
E_w	−0.289 ***
	(0.046)
E_w2	0.229 ***
	(0.037)
E_w low		−0.039 ***
		(0.007)
E_w high		0.034 ***
		(0.009)
high		0.000
		(0.001)
Lev	−0.037 ***	−0.037 ***
	(0.001)	(0.001)
Ppe	−0.027 ***	−0.027 ***
	(0.002)	(0.002)
Indb	0.010 ***	0.010 ***
	(0.003)	(0.003)
Top1	0.014 ***	0.014 ***
	(0.002)	(0.002)
Intang	0.007	0.007
	(0.004)	(0.004)
Growth	0.012 ***	0.012 ***
	(0.001)	(0.001)
Age	−0.005 ***	−0.005 ***
	(0.001)	(0.001)
industry effect	YES	YES
vintage effect	YES	YES
C	0.168 ***	0.075 ***
	(0.015)	(0.004)
N	24,929	24,929
R2	0.213	0.213
adj. R2	0.212	0.212

Note: Robust white-robust-adjusted standard errors in parentheses; *** indicate significance at the 1% levels.

, (1), the regression result with the quadratic term shows that the primary term of E_w is significantly negatively related to ES, and the quadratic term of E_w is significantly positively related to ES, which initially confirms that there is a “U”-shaped relationship between the performance of firms in the environment (E) dimension and a firm’s surplus sustainability. However, if the relationship exists only in the left half of the descending curve, the regression result still shows that the quadratic term of E_w is significantly positively related to ES. Therefore, to ensure the accuracy of the test, this paper further conducts a breakpoint regression [81] at the maximum value of the explanatory variables, and the results are shown in (2). The testing mechanism involves finding the minimum value point of the U-shaped curve and generating new predictive values at the minimum value point, i.e., E_w low and E_w high, and if the regression results for the two explanatory variables are significant and heteroskedastic, it suggests a “U”-shaped relationship between the performance of corporate environment (E) dimensions and corporate surplus persistence. The empirical results confirm this view, and the results are shown in (2). The performance of the enterprise environment (E) dimension has a long-term positive effect on the enterprise’s surplus sustainability, i.e., in the long run, enhancing the performance of the enterprise environment (E) dimension can improve the enterprise’s surplus sustainability. This long-term effect may be because, with the maturity of environmental protection technology and the continuous implementation of environmental protection measures, enterprises can gradually reduce operating costs and improve the efficiency of resource utilization. In the long run, good environmental performance can help companies build a positive image, enhance brand value, and attract more consumers and investors. These positive factors will gradually translate into economic benefits for the company and enhance the sustainability of its surplus.

6. Conclusions

6.1. Theoretical Implications

Based on the data of A-share listed companies in Shanghai and Shenzhen from 2010 to 2022, this paper investigates the impact of corporate ESG performance on surplus sustainability, examines the mechanism of this relationship, and analyzes heterogeneity based on region. It was found that, in the main effect, by improving ESG, the social (S) and corporate governance (G) performances of enterprises have a positive effect on the surplus sustainability of enterprises; in the short term, improving the environmental (E) performance of enterprises will weaken the surplus sustainability of enterprises (with H1a and H1b confirmed). In the mediation analysis, it was found that the cost of debt financing and institutional investors’ shareholding ratio play a mediating role in the positive relationship between a firm’s ESG and social (S) and corporate governance (G) performances, as well as surplus sustainability. In the heterogeneity analysis, it was found that the positive correlation between a firm’s ESG, corporate governance (G) performance, and surplus persistence is more significant in the eastern region, while the heterogeneity of a firm’s environmental (E) and social responsibility (S) performances is not significant across regions. Further analysis found that in the long run, enhancing environmental performance can improve the sustainability of corporate surplus, i.e., there is a “U”-shaped relationship between the environmental performance of firms and the sustainability of corporate surplus. In previous studies, most researchers tended to consider corporate ESG performance as a comprehensive indicator, with few attempting to refine ESG into environmental, social, and corporate governance components to analyze their differentiated impacts on corporate performance. Compared with existing studies, this paper looks at the three dimensions of corporate ESG and conducts a refined assessment, reviewing both short-term and long-term perspectives. It was found that in the short-term perspective, there are differences in the impacts of the three dimensions of ESG on corporate surplus sustainability, a finding that further expands the research perspective and refines the findings. In addition, the findings of this paper show that a firm’s ESG performance and its social and governance dimensions can enhance a firm’s surplus persistence, which is in line with the findings of most previous scholars (that enhancing a firm’s ESG performance can enhance the firm’s financial performance).

6.2. Practical Implications

Based on the conclusion of the study, this paper puts forward the following suggestions.

First, companies should emphasize ESG, social responsibility (S), and corporate governance (G) performances. Improving these aspects not only helps enterprises establish a good social image but also enhances the sustainability of corporate surplus.

Second, companies should balance short-term and long-term environmental (E) inputs. In the short term, companies may face weakening surplus sustainability due to increased EI. Therefore, while increasing environmental investments, companies need to rationally plan the use of funds to ensure a balance between environmental investment and corporate profitability.

Third, for enterprises in the eastern region, more attention should be paid to the input and performance of ESG fulfillment in corporate governance (G). As the eastern region usually has more developed economic, cultural, and technological conditions, enterprises should make full use of these advantages and formulate a more accurate ESG strategy, taking into account the local market demand and competitive environment, to improve the operating results.

6.3. Research Limitations

Although this paper achieved research results regarding the impact of corporate ESG performance on surplus sustainability, there are still some inevitable shortcomings. First, in further analysis, this paper finds that there is a “U”-shaped relationship between corporate environmental inputs and surplus sustainability, but this paper has not yet been able to fully analyze the formation mechanisms and driving factors of this “U”-shaped relationship, which should be supplemented in future research. Second, in the heterogeneity test, this paper only examines regional heterogeneity and fails to comprehensively analyze firms in the context of broader heterogeneity, such as industry characteristics, firm size, ownership structure, etc., which may have an important impact on the relationship between ESG practices and surplus sustainability. Due to space constraints, the above issues cannot be explored in depth in this paper and will be expanded and deepened in subsequent studies to address these shortcomings, promote the deepening of ESG practices, and enhance surplus sustainability.