The Impact of ESG Investments on Corporate Value and Performance: A Comparative Study of Clothing Manufacturing and Service Industries in China

The importance of ESG (Environmental, Social, and Governance) investments has garnered increased attention from corporations and investors due to the rising demand for sustainable development. Prior research has substantiated that ESG activities contribute significantly to a company's long-term growth. This paper aims to explore the impact of ESG investments on corporate financial performance and enterprise value by analyzing publicly available data from 79 service manufacturing companies and 80 service industry companies listed on the Chinese A-share stock market. It particularly emphasizes a comparative study between the clothing manufacturing industry and the service industry, taking into account the distinct characteristics of these sectors. The research findings for the apparel manufacturing industry reveal that while ESG scores do not significantly affect financial performance (ROA and ROE), they do positively influence corporate value (Tobin's Q). Further investigation into individual ESG dimension scores indicates that environmental (E) investments in the clothing manufacturing industry significantly affect corporate value, whereas the impacts of social (S) and governance (G) dimensions are not significant. Conversely, results for the service industry demonstrate that ESG investments positively impact financial performance but do not significantly affect corporate value. Subsequent analysis of individual dimension scores reveals that social (S) investments in the service industry positively impact financial performance, while environmental (E) and governance (G) dimensions do not have significant effects. Based on these findings, this research advocates for ESG disclosure, highlighting its significance as a reference point for investors and companies. Furthermore, the study underscores the varying weights of ESG's three dimensions in different contexts, emphasizing the need for different industries to engage in flexible strategic planning based on their specific characteristics.