The Moderating Role of Ownership Concentration on Financing Decisions and Firm’s Sustainability: Evidence from China

Kankan Wen, Andrew Agyemang (), Noha Alessa, Inusah Sulemana and Abednego Osei
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Kankan Wen: School of Chinese Language and Literature, Ningxia Normal University, Guyuan 756000, China
Andrew Agyemang: School of Business, SDD—University of Business and Integrated Development Studies, Wa P. O. Box WA64, Ghana
Noha Alessa: Department of Accounting, College of Business and Administration, Princess Nourah bint Abdulrahman University, P. O. Box 84428, Riyadh 11671, Saudi Arabia
Inusah Sulemana: School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China
Abednego Osei: School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China

Sustainability, 2023, vol. 15, issue 18, 1-14

Abstract: We examined the impact of financing decisions on a firm’s sustainability in China as it aspires to achieve carbon neutrality. To proxy firms’ sustainability performance, we proposed an index for environmental, social, and governance (ESG) performance. The financing decision was proxied by debt funding and equity funding. Using secondary data from China Stock Market Accounting Data from 2016 to 2022, we utilize the fixed effect and fully modified ordinary least squares estimators for the empirical analysis. The analysis indicated a favorable link between debt funding and ESG performance. We uncovered an inconsistent association between equity funding and ESG performance. Moreover, ownership concentration revealed a significant role in moderating the impact of debt financing and ESG performance in China. The findings affirm that firms should rely on debt funding rather than equity funding to enhance their ESG performance. Hence, policymakers should enact laws allowing easy access to debt funding for companies to ensure higher ESG performance. This, in the long term, will contribute to the Chinese dream of carbon neutrality.

Keywords: financing decision; capital structure; ESG performance; ownership concentration; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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