Exploring the Nonlinear Relationship between ESG Performance and Investment Inefficiency: The Moderating Role of Cost of Debt in Chinese Public Companies

Yining Wang ()
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Yining Wang: Shanghai University, School of Economics

A chapter in Proceedings of the 2025 7th International Conference on Economic Management and Cultural Industry (ICEMCI 2025), 2025, pp 533-544 from Springer

Abstract: Abstract As the Chinese economy shifts from a rapid growth phase to a stage of high-quality development, Environmental, Social, and Governance (ESG) concepts have increasingly become critical indicators for assessing the sustainable development of enterprises, directly influencing the efficacy of investment decisions. Utilizing data from A-share listed companies in Shanghai, Shenzhen, and Beijing from 2011 to 2024, this study empirically examines the relationship between corporate ESG performance and investment inefficiency, while exploring the heterogeneous impacts of the corporate lifecycle and the moderating effect of cost of debt. Findings indicate the presence of a non-linear, inverted U-shaped relationship between ESG performance and investment inefficiency, predominantly driven by firms in the growth stage. Furthermore, the cost of debt financing serves as a negative moderating factor in this relationship. This research provides a theoretical foundation for optimizing ESG resource allocation across enterprises at various developmental stages and offers practical insights for policymakers aiming to enhance ESG incentive mechanisms and financing support policies. Additionally, it contributes to the broader discourse on ESG and corporate investment efficiency.

Keywords: ESG Performance; Investment Inefficiency; Inverted U-shaped Relationship; Cost of Debt (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-888-2_52

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DOI: 10.2991/978-94-6463-888-2_52

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