ESG and cost of equity capital: Biophysical and ergonomic considerations from Chinese listed companies
Abstract
The economic consequences of ESG have been debated between the “stakeholder hypothesis” and the “management self-interest hypothesis”. This study not only analyzes the impact of ESG behavior on the cost of equity capital using panel data and regression models but also delves into the biophysical and ergonomic aspects within the corporate context. ESG initiatives can lead to changes in the work environment and operational processes. For example, improvements in environmental sustainability might involve the installation of ergonomic equipment to reduce employees’ physical strain during work, which in turn could affect their productivity and overall well-being. Socially responsible initiatives may lead to a more harmonious workplace atmosphere, reducing stress levels among employees and potentially influencing their physiological states. The study uses panel data and regression models to analyze the impact of ESG behavior on the cost of equity capital. The findings reveal that corporate ESG behavior significantly reduces the cost of equity capital, supporting the stakeholder hypothesis. Further analysis indicates that this effect is more pronounced in highly market-oriented regions and non-state-owned enterprises, highlighting the roles of market efficiency and organizational flexibility. Additionally, the consideration of biophysical and ergonomic impacts on stakeholders provides a more comprehensive understanding of how ESG strategies can have far-reaching effects within and outside the organization. This research provides empirical evidence for enterprises to actively implement ESG strategies and offers actionable insights for governments to formulate policies that foster sustainable development.
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