Green Initiatives and Financial Performance: ESG Associations and Corporate Life-Cycle Contingencies in China’s Heavily Polluting Industries

Abstract

This study examines how green initiatives are associated with financial performance through a statistical indirect pathway involving environmental, social, and governance (ESG) assessment and whether that pathway varies across life-cycle stages. Using an unbalanced panel of 6579 firm-year observations from 1114 Chinese A-share firms in heavily polluting industries during 2015–2024, the analysis compares green investment, green innovation, green subsidy, and ISO 14001 certification within a common framework. Firm and year fixed-effects models with firm-clustered inference are combined with 5000 firm-cluster bootstrap replications and Benjamini–Hochberg false-discovery-rate adjustment. All four initiatives are positively associated with Huazheng ESG ratings. ESG ratings are positively associated with ROA and ROE, whereas a positive association with Tobin’s Q is not established. Each initiative exhibits a positive statistical indirect association with ROA through ESG, although total financial associations remain heterogeneous; green subsidy shows a negative contemporaneous total association with ROA. The mediated effects are economically modest: a one within-firm standard-deviation increase in each initiative corresponds to about 0.20–0.34% of a within-firm standard deviation of ROA through ESG. By contrast, a one within-firm standard-deviation increase in green subsidy is associated with a −0.133 percentage-point total ROA association. Corporate life cycle selectively conditions the pathway: ESG-mediated associations of green investment and green subsidy are significantly stronger in growth-stage firms than in mature or declining firms, while comparable stage differences are not established for green innovation or certification. The evidence distinguishes external sustainability assessment from immediate profitability and locates life-cycle dependence in resource-deployment-intensive green actions.