Does ESG Performance Enhance Financial Flexibility? Evidence from China

Dingzu Zhang and Luqi Liu ()
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Dingzu Zhang: School of Economics and Management, Changsha University of Science and Technology, Changsha 410004, China
Luqi Liu: School of Economics and Management, Changsha University of Science and Technology, Changsha 410004, China

Sustainability, 2022, vol. 14, issue 18, 1-22

Abstract: Environmental, social, and governance (ESG) performance may be one of the strategies firms adopt to enhance their financial flexibility in response to an increasingly uncertain environment and difficult sustainability conditions. We use A-share listed firms in China from 2015 to 2020 as samples to test the influencing mechanism of ESG performance on financial flexibility. The empirical results indicate that ESG performance significantly enhances financial flexibility. The mechanism results show that financing constraints mediate ESG performance and firms’ financial flexibility. The additional analysis suggests that environmental uncertainty and market attention have significant positive moderating effects. That is, the promotion effect of firms in high uncertainty environments is more apparent, and the same is true in high market attention. This study supports instrumental stakeholder theory, signaling, and social impact hypothesis. It has enlightenment significance for firms, investors, and creditors to evaluate ESG performance and government departments to formulate relevant policies.

Keywords: ESG performance; financial flexibility; financing constraints; environmental uncertainty; market attention (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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