Can enterprise ESG practices ease their financing constraints? Evidence from Chinese listed companies

Abstract

Under the guidance of the United Nations SDGs target framework, enterprises' ESG practices of developed countries can effectively promote external investors' ESG investment, thus easing enterprises' financing constraints. Using the data of Chinese A-share listed companies in the Shanghai- and Shenzhen-stock exchange markets from 2013 to 2022, this study explores the causal relationship between enterprises' ESG practices and their financing constraints to provide Chinese experience, examines the mediating effect with corporate transparency and investor sentiment, and analyzes the heterogeneity with external auditor type and earnings management motivation. It is found that enterprise ESG practices can enhance their financing ability by improving corporate transparency and suppressing investor sentiment; for the non-Big 4 audit listed companies and the listed companies with the weak motivation of earnings management, the corporate ESG practice has a more significant effect on their financing ability. This study enriches the research on the relationship between ESG practice and ESG financing by providing Chinese evidence.

Keywords

• G32
• G38
• G41
• D22
• D82
• D83