The fixed effects regression has become an important method for estimating causal effects from panel data. Drawing on a sample of 282 companies in heavily-polluting industries in China from 2018 to 2021, this study utilized the linear fixed effects regression method to empirically examine the relationship between ESG and financial performance. Specifically, the study employed variable replacement and IV-GMM approaches to conduct robustness tests. The empirical results reveal a significant positive correlation between ESG composite scores and financial performance. Among the dimensions (E, S, G), the E dimension shows a significant positive correlation, while the S and G dimensions lack a significant correlation. Notably, the E dimension most prominently promotes financial performance. In China, the impact is significant in the East but not in the Central or Western regions.
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