Moderating role of audit quality in ESG performance and capital financing dynamics: insights in China

R. M. Ammar Zahid (), Adil Saleem (), Umer Sahil Maqsood () and Judit Sági ()
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R. M. Ammar Zahid: Yunnan Technology and Business University
Adil Saleem: Hungarian University of Agriculture and Life Sciences
Umer Sahil Maqsood: Xi’an Jiaotong University
Judit Sági: University of Applied Sciences

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2024, vol. 26, issue 5, No 44, 12060 pages

Abstract: Abstract This study uncovers the relationship of company’s Environmental, Social, and Governance (ESG) performance and capital structure in Chinese corporate sector. Additionally, we investigated if audit quality intervenes this ESG—capital structure nexus. Using panel regressions with fixed effects, we chose Chinese A-Listed companies giving 6295 firm-year observations from 2010 to 2019. The results support the legitimacy theory, suggesting that a company's ESG disclosure and overall progress is a crucial factor in determining their financing decisions. The results suggest that firms with better ESG performance found to have less debt financing and easier access to equity capital from stock markets. However, the results did not show a significant impact of audit quality on this relationship. Sensitivity tests, such as alternate parameter estimation measures, techniques to address endogeneity issues (sysGMM), and lagged regressions, were conducted and did not change the key conclusions of the study.

Keywords: Environment; Social; Governance; ESG; Capital structure; Financial leverage (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10668-023-03636-9

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