The impact of ESG performance on corporate debt costs: A signaling perspective

Yuhao Cheng, Chuqian He and Can Tang

Finance Research Letters, 2025, vol. 76, issue C

Abstract: Environmental, Social, and Governance (ESG) factors are significant indicators of company sustainability practices and company's profitability. This study uses a signaling game model to analyze the impact of ESG performance on the cost of corporate debt, and uses the data from Chinese A-share listed firms spanning 2019 to 2023 to confirm the moderating effect. The results indicate that when company financing is high, positive ESG performance can significantly decrease the cost of debt. Conversely, when the financing amount is low, the impact of ESG performance on reducing the cost of financing is negligible.

Keywords: ESG performance; Debt cost; Signaling game; Financing decisions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002843

DOI: 10.1016/j.frl.2025.107020

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