ESG performance and capital investment: Understanding the role of bank financing in BRICS countries

Jun Wen, Umar Farooq, Abdulrahman Alomair and Abdulaziz S. Al Naim

Research in International Business and Finance, 2025, vol. 79, issue C

Abstract: The incorporation of environmental, social, and governance (ESG) practices into financial decision-making has become increasingly notable. This study examines the impact of ESG performance on corporate capital investment, as well as the intervening role of bank financing, in BRICS countries. The study utilizes a comprehensive dataset over the period 2010–2022 and employs fixed effect and system generalized method of moments (GMM) models to analyze the data. The empirical findings reveal a positive impact of corporate ESG performance and bank financing on capital investment. Notably, bank financing emerges as a significant factor positively influencing capital investment decisions, suggesting a crucial role in bridging sustainable finance and capital allocation. The study identifies a mediating relationship, emphasizing that the positive effect of ESG performance on capital investment remains consistent in the presence of bank financing. Corporate investors, financial institutions, and policymakers can gain actionable insights from the findings. It guides corporate investors in understanding how ESG performance influences investment attractiveness, assists financial institutions in refining lending practices, and provides policymakers with insights for shaping regulations that foster sustainable practices. As businesses and investors recognize the imperative of integrating ESG considerations, the insights from this study contribute to a more sustainable and resilient global financial system. This study contributes to existing literature by addressing gaps in understanding the nuanced impact of ESG performance on capital investment decisions and the mediating role of bank financing.

Keywords: ESG performance; Bank financing; Capital investment; BRICS (search for similar items in EconPapers)
JEL-codes: G31 G32 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531925003149
Full text for ScienceDirect subscribers only

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:eee:riibaf:v:79:y:2025:i:c:s0275531925003149

DOI: 10.1016/j.ribaf.2025.103058

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().