The Inverted U-Shaped Effect of Economic Policy Uncertainty on Corporate ESG Performance: A Study Based on Machine Learning Models and Micro Data

Chenhong Zheng, Fangshun Xiao, Meihua Zou, Mengzhe Liu, Mengqian Zhang

2022

Abstract

In this paper, we first use the traditional econometric models to examine the impact of economic policy uncertainty (EPU) on enterprises’ Environmental, Social and Governance (ESG) performance in the economy using a sample of all A-share listed firms from 2007 to 2020. Then, we apply the Python Machine Learning model to further explore the real nonlinear impact of EPU on corporate ESG performance. Our estimation results indicate that the nexus between EPU on enterprises’ ESG performance is inverted U-shaped, and the results remain robust after endogeneity treatment and robustness checks. By further investigating the heterogeneous effects of EPU in ESG performance, we find that the inflection point of the effect of EPU on ESG performance is larger for firms in more market-oriented regions and non-state enterprises. For large-scale firms, EPU shows a positive linear relationship with ESG performance rather than an inverted U-shaped relationship. The results of the machine learning model analysis show that the importance of EPU on the impact of corporate ESG is more prominent compared to traditional factors. There is a significant non-linear relationship between the two. Compared with the traditional econometric model, the machine learning model fits better. Our study provides policy insights for policy economic policy implementation and for promoting high-quality economic development.

Paper Citation

in Harvard Style

Zheng C., Xiao F., Zou M., Liu M. and Zhang M. (2022). The Inverted U-Shaped Effect of Economic Policy Uncertainty on Corporate ESG Performance: A Study Based on Machine Learning Models and Micro Data. In Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME; ISBN 978-989-758-636-1, SciTePress, pages 464-471. DOI: 10.5220/0012034900003620

in Bibtex Style

@conference{icemme22,
author={Chenhong Zheng and Fangshun Xiao and Meihua Zou and Mengzhe Liu and Mengqian Zhang},
title={The Inverted U-Shaped Effect of Economic Policy Uncertainty on Corporate ESG Performance: A Study Based on Machine Learning Models and Micro Data},
booktitle={Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME},
year={2022},
pages={464-471},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012034900003620},
isbn={978-989-758-636-1},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 4th International Conference on Economic Management and Model Engineering - Volume 1: ICEMME
TI - The Inverted U-Shaped Effect of Economic Policy Uncertainty on Corporate ESG Performance: A Study Based on Machine Learning Models and Micro Data
SN - 978-989-758-636-1
AU - Zheng C.
AU - Xiao F.
AU - Zou M.
AU - Liu M.
AU - Zhang M.
PY - 2022
SP - 464
EP - 471
DO - 10.5220/0012034900003620
PB - SciTePress