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Abstract
For decades, coal has served as the dominant component of China’s energy mix. Understanding the mechanisms through which coal prices variations affect China's economy and financial markets is of considerable importance. This study analyzes the influence of coal prices on company performance using a dataset comprising 33,877 annual observations from 4,491 publicly traded enterprises in China’s A-share market covering the period 2014 to 2023. It further investigates how ESG (environmental, social, and governance) initiatives shape this linkage. The findings reveal that coal price fluctuations exert a significantly adverse effect on corporate performance, particularly in the overall market and energy-related sectors. In contrast, non-energy industries, which are less reliant on coal, exhibit lower sensitivity to coal price changes. Furthermore, ESG performance significantly amplifies the negative impact of coal price fluctuations on company performance. A plausible explanation is that firms with superior ESG credentials allocate greater resources to environmental and social initiatives, further increasing their cost burden. The results provide novel insights on the evolving relationship among energy price volatility, corporate performance, and ESG strategies, emphasizing the obstacles firms encounter in aligning financial objectives with sustainability targets in a coal-centric energy environment.