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ESG, financial constraint and financing activities: A study in the Chinese market

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  • Xuejing Guo
  • Shi Li
  • Xiaoping Song
  • Zilin Tang

Abstract

This paper investigates the impact of Chinese firms' environmental, social, and governance (ESG) performance on their financial constraint and financing activities. We find a negative association between firms' ESG performance and their financial constraint driven by the Chinese government's commitment to tackling climate change. Compared with state‐owned enterprises (SOEs), non‐SOEs have alleviated their financial constraint through both equity and debt issuance, thanks to the stock price appreciation and green credit. High‐pollution firms benefit from both equity and debt issuance, while low‐pollution firms mainly finance through equity issuance. Our findings demonstrate the leading role of the Chinese government in its domestic capital markets.

Suggested Citation

  • Xuejing Guo & Shi Li & Xiaoping Song & Zilin Tang, 2024. "ESG, financial constraint and financing activities: A study in the Chinese market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(2), pages 1637-1663, June.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:2:p:1637-1663
    DOI: 10.1111/acfi.13196
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