We explore the impact of natural disasters on corporate valuation in the context of environmental, social, and governance (ESG) performance in China. Our findings reveal that heightened exposure to natural disasters significantly reduces firm value, particularly for firms with high ESG ratings—a contrast to the positive ESG outcomes often observed in developed markets. Firms with strong ESG commitments face greater operational costs and reduced profitability during crises. This leads to the negative effect on valuation. The adverse impact is more profound for non-state-owned enterprises, less environment-sensitive firms, and companies with elevated operational risks or lower resilience, as they often lack sufficient resources or governmental support. These results suggest that overinvestment in ESG initiatives may hinder corporate flexibility and strain financial resources in developing economies. • We explore the impact of natural disasters on corporate valuation in the context of ESG performance. • Heightened exposure to natural disasters significantly reduces firm value, particularly for firms with high ESG ratings. • Firms with strong ESG commitments face greater operational costs and reduced profitability during crises. • The adverse impact is more pronounced for non-state-owned enterprises, less environment-sensitive firms, and companies with elevated operational risks or lower resilience.
Lu et al. (Sun,) studied this question.