The Impact of Firm Sustainability and Competitiveness on Firm Performance: An Empirical Analysis from China and the United States

Abstract

This study aimed to find the impact of firm sustainability (Environmental, Social, and Governance (ESG) disclosure and competitiveness on a firm’s performance and the sustainability effect on a firm’s performance. The sample consisted of 1164 Chinese firms and 1427 United States firms, composed of 21-year periods from 2000 to 2020. The secondary data was collected from the Thomson Reuters Asset for ESG database. In China, the results of GMM revealed that ESG has a positive and significant impact on firm performance, and CADV has an insignificant and positive effect on firm performance. In the United States, ESG has a positive and negligible impact on firm performance, while CADV has a significant and positive impact on firm performance. To check whether reverse causality exists in data. The result indicated that firm performance and CADV positively and significantly impact ESG in China. Whereas a US firm’s performance has a positive and insignificant impact on ESG, CADV has a negative and significant impact on ESG. Compared to the United States, China has more excellent competitors, and ESG disclosure has a better effect on firm performance. The policy suggests that every organization that wants to maximize its profit and better image in the market should adopt ESG activities with sustainable criteria.