Does ESG Performance Help Corporate Deleveraging? Based on an Analysis of Excessive Corporate Debt

Tao Zhu, Dongjiao Liu and Lequan Zhang ()
Additional contact information
Tao Zhu: School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China
Dongjiao Liu: School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China
Lequan Zhang: School of Economics, Zhongnan University of Economics and Law, Wuhan 430073, China

Sustainability, 2025, vol. 17, issue 3, 1-22

Abstract: The ESG performance of enterprises is becoming an essential form of support for investors’ investment decisions and a critical aspect to follow to achieve sustainable development of enterprises. This study uses A-share listed companies in China from 2009 to 2022 as the research sample to study the impact of ESG performance on corporate over-indebtedness and its mechanism. The findings show that good ESG performance significantly negatively affects the level of corporate over-debt and the probability of over-debt. The mechanism test revealed that ESG performance reduces the level and probability of excessive corporate debt by alleviating information asymmetry, reducing corporate debt financing costs and short-term debt length, and improving corporate operating performance. The heterogeneity analysis indicates that the inhibitory effect of ESG performance on corporate over-indebtedness is more significant in polluting industries and regions with a low degree of marketization. Through the moderating effect, we find that improved internal control quality and increased analyst attention can enhance the inhibitory effect of ESG performance on excessive corporate debt. Based on the results above, enterprises should focus on improving ESG performance to reduce the risk of excessive debt and achieve sustainable development. This paper enriches the research on ESG performance and corporate leverage manipulation from the perspective of corporate over-indebtedness, deepens and expands the research on the mechanism of ESG performance affecting corporate over-indebtedness, and explores the moderating effect of internal and external governance mechanisms on ESG performance affecting corporate over-indebtedness.

Keywords: excessive corporate debt; ESG; information asymmetry; operating performance; debt financing costs (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/3/1274/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/3/1274/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:3:p:1274-:d:1583907

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().