Competitive Pressure and ESG

77 Pages Posted: 28 Aug 2023 Last revised: 28 Nov 2023

See all articles by Vesa Pursiainen

Vesa Pursiainen

University of St. Gallen; Swiss Finance Institute

Hanwen Sun

University of Bath, School of Management

Yue Xiang

University of Bath - School of Management

Date Written: August 21, 2023

Abstract

A firm’s exposure to competition is negatively associated with its ESG performance. We measure domestic competitive pressure by product market fluidity, based on product text descriptions, and find that higher fluidity – indicating higher product market threats – is associated with lower ESG scores. Fluidity matters more for financially constrained firms, capital-intensive industries, and costly activities, as well as firms with shorter-term shareholders. Increasing exposure to Chinese import competition is associated with a reduction in ESG scores. This effect of import competition is stronger for firms less exposed to domestic competition. Local climate attitudes moderate the effect of competitive pressure.

Keywords: competition, product market threats, ESG, sustainability, international trade

JEL Classification: D40, F18, F64, G30, M14

Suggested Citation

Pursiainen, Vesa and Sun, Hanwen and Xiang, Yue, Competitive Pressure and ESG (August 21, 2023). Swiss Finance Institute Research Paper No. 23-69, Available at SSRN: https://ssrn.com/abstract=4546541 or http://dx.doi.org/10.2139/ssrn.4546541

Vesa Pursiainen (Contact Author)

University of St. Gallen ( email )

Swiss Institute of Banking and Finance
Unterer Graben 21
St.Gallen, 9000
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Hanwen Sun

University of Bath, School of Management ( email )

School of Management, University of Bath
Bath
Bath, BA2 7AY
United Kingdom

Yue Xiang

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

HOME PAGE: http://https://sites.google.com/view/yuexiang

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