ESG Performance and Corporate Investment Inefficiency: The Moderating Roles of Cost of Debt and Stock Returns

Xinrui Xu ()
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Xinrui Xu: South China Agricultural University, College of International Education

A chapter in Proceedings of the 2025 7th International Conference on Economic Management and Cultural Industry (ICEMCI 2025), 2025, pp 567-579 from Springer

Abstract: Abstract In light of the global emphasis on sustainable development and the enduring concern regarding corporate investment efficiency, this study investigates the relationship between Environmental, Social, and Governance (ESG) performance and the inefficient investment behavior of enterprises. Through an analysis of data from A-share listed companies on the Shanghai, Shenzhen, and Beijing stock exchanges from 2011 to 2024, alongside ESG rating data provided by Huazheng Securities, this research thoroughly examines the influence of ESG scores on the investment inefficiencies observed within enterprises. The study incorporates cost of debt and stock returns as moderator variables to assess the moderating effects of external market factors on this relationship. The empirical findings demonstrate that superior ESG performance is significantly associated with reduced inefficient investments. However, the cost of debt financing does not exhibit a significant moderating effect on this relationship, whereas stock returns are shown to positively enhance this inhibitory effect. These results underscore the critical importance of robust ESG practices within firms and their contribution to enhancing long-term value. By elucidating the intricate interactions between ESG, market factors, and investment behavior, this study offers valuable insights for businesses, investors, and policymakers. It promotes the adoption of more sustainable business practices and provides novel perspectives and empirical evidence for optimizing resource allocation strategies.

Keywords: ESG Performance; Investment Inefficiency; Cost of Debt; Stock Returns (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_55

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DOI: 10.2991/978-94-6463-888-2_55

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