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Corporate ESG performance and trade credit financing – Evidence from China

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  • Luo, Chunhua
  • Wei, Dianlong
  • He, Feng

Abstract

This paper explores the impact of firms' comprehensive ESG (environmental, social, and governance) ratings on their trade credit financing in the Chinese market. Using a sample of publicly listed companies from 2011 to 2019, we find that corporate ESG performance could significantly increase a firm's access to trade credit. These results still hold after a series of robustness checks. Furthermore, ESG increases a firm's trade credit by mitigating information asymmetry, improving operating efficiency and reducing risk. Our study provides general implications to encourage firms to participate in ESG in the current carbon emission transition period.

Suggested Citation

  • Luo, Chunhua & Wei, Dianlong & He, Feng, 2023. "Corporate ESG performance and trade credit financing – Evidence from China," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 337-351.
    • Handle: RePEc:eee:reveco:v:85:y:2023:i:c:p:337-351
    DOI: 10.1016/j.iref.2023.01.021
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    Cited by:

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    3. Yu Lu & Yaqi Zhao & Lian Liu & Guoying Shi, 2024. "ESG Ratings and Green Innovation," Sustainability, MDPI, vol. 16(24), pages 1-30, December.
    4. Yuechen Wu, 2024. "Does ESG Consistently Promote the Corporate Financial Performance? A Study of the Global Cruise Industry," Papers 2409.00758, arXiv.org.
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    10. Zhao, Yuanshuang & Dong, Liang & Sun, Yuhang & Ma, Yunning & Zhang, Ning, 2024. "Is air pollution the original sin of firms? The impact of air pollution on firms' ESG scores," Energy Economics, Elsevier, vol. 136(C).
    11. Silvia Bressan, 2023. "Reinsurance and Sustainability: Evidence from International Insurers," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(6), pages 1-8.
    12. Yin, Zhujia & Deng, Rantian & Xia, Jiejin & Zhao, Lili, 2024. "Climate risk and corporate ESG performance: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
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    18. Li, Ping & Wang, Kai & Zhang, Junping, 2023. "Does the inclusion of Chinese A-shares in the MSCI EM index promote ESG performance?," Finance Research Letters, Elsevier, vol. 58(PB).
    19. Shobande, Olatunji A. & Ogbeifun, Lawrence & Apergis, Nicholas, 2024. "Crafting monetary policy beyond low carbon legacy," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 764-781.
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    21. Shi, Xianwang & Ma, Jianteng & Jiang, Anxuan & Wei, Shuang & Yue, Leilei, 2023. "Green bonds: Green investments or greenwashing?," International Review of Financial Analysis, Elsevier, vol. 90(C).
    22. He, Feng & Liu, Guanchun & Hao, Jing & Li, Youwei, 2023. "CSR performance and firm idiosyncratic risk in a data-rich environment: The role of retail investor attention," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).

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