The Impact of ESG Performance of Traditional Chinese Medicine Firms on the Firms’ Financial PerformanceWith Reference to the Moderating Role of Internal Controls and External Concerns

ESG performance is an important criterion for measuring the sustainable development of enterprises. Studying how ESG performance affects financial performance helps Traditional Chinese Medicine (TCM) firms actively fulfill their ESG responsibilities. This article examines the impact of ESG performance of TCM firms on their financial performance using data from A-share-listed TCM companies from 2012 to 2022. The research finds that (1) good ESG performance can enhance the financial performance of TCM firms, and this conclusion remains valid after a series of robustness tests; (2) internal control and external media attention positively moderate the impact of ESG performance on financial performance in TCM firms; (3) mediation analysis shows that the ESG performance of TCM firms can promote corporate innovation investment, thereby enhancing financial performance; and (4) heterogeneity analysis shows that the impact of ESG performance on financial performance is more significant in firms located in regions with a high degree of marketization. Additionally, the effect is stronger in firms with a separation of ownership and management, but is not significant in state-owned enterprises. Finally, this article suggests strengthening ESG responsibility awareness, focusing on internal and external factors, and further enhancing innovation investment in TCM firms.