Environmental, social, and governance performance and corporate debt maturity in China

Mengling Zhou, Zizhen Huang and Kangqi Jiang

International Review of Financial Analysis, 2024, vol. 95, issue PA

Abstract: The prevalence of over-holding short-term debt is widespread among Chinese companies. This study aims to explore the intricate association between environmental, social, and governance (ESG) involvement and corporate debt maturity. Utilizing data from samples of publicly listed Chinese firms from 2011 to 2021, we observe a positive correlation between ESG performance and the long-term debt ratio of enterprises. Importantly, the marginal effect of ESG on debt maturity is obvious for enterprises exhibiting higher levels of ESG performance. Rigorous robustness checks, meticulous treatment of endogeneity, and the application of random forest prediction techniques substantiate the aforementioned conclusions. Heterogeneity analysis unveils that state-owned enterprises, enterprises with low investor attention, high-polluting enterprises, and those subject to stringent government environmental governance derive greater benefits from ESG enhancement. Mechanism analysis further elucidates that the causal relationship between ESG performance and debt maturity may be attributed to the ameliorating effects of ESG on information asymmetry, default risk, and innovation activities. Finally, our study discerns that the improved debt maturity resulting from the ESG effect signifies a noteworthy mitigation in firms' maturity mismatch. This investigation contributes novel empirical evidence to comprehending the implications of ESG and alleviating the debt maturity mismatch in enterprises characterized by an over-reliance on short-term debt.

Keywords: ESG; Debt structure; Maturity mismatch; Corporate finance; China (search for similar items in EconPapers)
JEL-codes: G32 M14 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pa:s1057521924002813

DOI: 10.1016/j.irfa.2024.103349

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