How Does Firm ESG Performance Impact Financial Constraints? An Experimental Exploration of the COVID-19 Pandemic

Dongyang Zhang (), Cao Wang () and Yu Dong ()
Additional contact information
Dongyang Zhang: Capital University of Economics and Business
Cao Wang: Capital University of Economics and Business
Yu Dong: Capital University of Economics and Business

The European Journal of Development Research, 2023, vol. 35, issue 1, No 10, 219-239

Abstract: Abstract This research assesses the effects of COVID-19-associated shocks on financial constraints and sustainable development goal (SDG) performance to shed light on the impact of SDGs on economic recovery. We construct a large sample of Chinese listed firms from quarterly firm-level accounting data from the China Stock Market & Accounting Research Database for the period 2019Q1–2021Q1, matched with environmental, social, and governance (ESG) scores, SDG performance from the WIND Database, and complemented with data on cumulative and new cases of COVID-19 from the World Health Organization. We use difference-in-differences to investigate any causal effect from COVID-19. We find that COVID-19 induces financial constraints in firms. Further, differing from the existing literature on the determinants of SDGs, we explore the supportive role of SDG performance on firm financial performance and show that ESG can better describe SDG performance and alleviate financial constraints. Moreover, both internal and external financial intermediaries improve with enhanced ESG performance in overcoming financial constraints. Our findings strongly indicate that a sustainable development strategy facilitates efficient adaptation to financial challenges and assists in overcoming external shocks.

Keywords: COVID-19 pandemic; Sustainable development goals; ESG performance; Financial constraints (search for similar items in EconPapers)
JEL-codes: D8 G3 G31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://link.springer.com/10.1057/s41287-021-00499-6 Abstract (text/html)
Access to full text is restricted to subscribers.

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:pal:eurjdr:v:35:y:2023:i:1:d:10.1057_s41287-021-00499-6

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/41287/PS2

DOI: 10.1057/s41287-021-00499-6

Access Statistics for this article

The European Journal of Development Research is currently edited by Spencer Henson and Natalia Lorenzoni

More articles in The European Journal of Development Research from Palgrave Macmillan, European Association of Development Research and Training Institutes (EADI) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().