The Effect of Financial Mismatch on Corporate ESG Performance: Evidence from Chinese A-Share Companies

Xiaoli Li, Wenxin Heng, Hangyu Zeng and Chengyi Xian ()
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Xiaoli Li: School of Economics and Management, Guangxi Normal University, Guilin 541004, China
Wenxin Heng: School of Economics and Management, Guangxi Normal University, Guilin 541004, China
Hangyu Zeng: School of Economics and Management, Guangxi Normal University, Guilin 541004, China
Chengyi Xian: School of Economics and Management, Guangxi Normal University, Guilin 541004, China

IJFS, 2025, vol. 13, issue 4, 1-20

Abstract: This study examines the effect of financial mismatch on corporate ESG performance in the context of China’s developmental strategy and its dual-carbon goals. Using panel data for Chinese A-share firms spanning 2009–2023 and employing fixed-effects regression models, we find that financial mismatch significantly weakens ESG performance. Further analysis reveals that this negative effect mainly operates through three channels: increased financing constraints, weakened internal control quality, and reduced innovation capability. The results remain robust across a series of alternative specifications and sensitivity tests. This study contributes to the literature by identifying financial mismatch as a key determinant of ESG outcomes and by clarifying the mechanisms through which it exerts influence. From a practical perspective, the findings suggest that alleviating financial mismatch by fostering patient capital, improving internal governance structures, and supporting firms’ green and sustainable investments is essential for enhancing corporate ESG performance and achieving China’s dual-carbon targets.

Keywords: financial mismatch; ESG performance; financing constraints; internal control; state-owned enterprises; corporate lifecycle (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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