Does Business Group’s Conscious of Social Responsibility Enhance its Investment Efficiency? Evidence from ESG Disclosure of China’s Listed Companies

Mengdie Hai, Ziwei Fang and Zhaohua Li
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Mengdie Hai: School of Economics, Hua Zhong University of Science and Technology, Wuhan 430074, China
Ziwei Fang: School of Economics, Hua Zhong University of Science and Technology, Wuhan 430074, China
Zhaohua Li: School of Economics, Hua Zhong University of Science and Technology, Wuhan 430074, China

Sustainability, 2022, vol. 14, issue 8, 1-18

Abstract: Business groups are industry exemplars whose investment decisions and social responsibility commitments are important for future sustainable development. We use data from China’s listed firms from 2012 to 2018 to investigate the effects of ESG-related disclosure on corporate investment efficiency by comparing the heterogeneity in ESG-related disclosure between group-affiliated firms and standalone firms, as well as between member firms within groups at different pyramid levels. We find that (1) group-affiliated firms are more willing to disclose ESG information than independent ones, and compared with lower-level pyramid member firms, higher-level pyramid member firms have a higher propensity of ESG disclosure; (2) over-investment for group-affiliated firms and under-investment for higher-level pyramid member firms are all moderated by their higher propensity for ESG disclosure. That is, corporate disclosure of ESG information significantly promotes investment efficiency; (3) by grouping the sample firms according to analyst attention and industry external financing dependence, respectively, we find that the promotion effect of ESG disclosure on corporate investment efficiency is more significant when the firms are followed by fewer analysts, or when firms belong to industries with higher external financing dependence. Our findings suggest that ESG disclosure plays an important role in driving a firm’s investment toward desirable levels.

Keywords: business group; ESG disclosure; corporate investment efficiency; pyramid structure; sustainable development (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 (3)

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