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The Impact of ESG on Excessive Corporate Debt

Author

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  • Xinhua Yang

    (School of Economics, Guangdong Ocean University, Zhanjiang 524088, China)

  • Tingting Yang

    (School of Economics, Guangdong Ocean University, Zhanjiang 524088, China)

  • Jingjing Lv

    (School of Economics, Guangdong Ocean University, Zhanjiang 524088, China)

  • Shuai Luo

    (School of Economics, Guangdong Ocean University, Zhanjiang 524088, China)

Abstract

ESG standards are increasingly becoming indispensable factors in corporate decision-making, with profound implications for the long-term sustainability of businesses. This study utilizes longitudinal data from 2010 to 2021 to investigate the influence of environmental, social, and governance (ESG) performance on excessive debt among publicly traded manufacturing companies in China. Employing panel regression alongside analysis of threshold, intermediary, and interaction effects, we meticulously dissect the mechanisms and influencing factors involved. Our findings reveal a significant adverse effect of ESG performance on excessive debt, characterized by heterogeneity across geographic locations, revenue growth rates, and ownership concentrations. Notably, company size and age exhibit a dual-threshold effect on excessive debt. Moreover, ESG performance demonstrates an intermediary effect, which is mitigated by proxy cost-to-asset turnover and debt financing cost COD2. Institutional attention and equity capital cost synergistically amplify the suppressive impact of ESG performance on excessive debt. Based on the research findings above, companies should carefully consider and adjust their ESG performance to reduce excessive debt risks, thereby enhancing their sustainable competitiveness.

Suggested Citation

  • Xinhua Yang & Tingting Yang & Jingjing Lv & Shuai Luo, 2024. "The Impact of ESG on Excessive Corporate Debt," Sustainability, MDPI, vol. 16(16), pages 1-22, August.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:16:p:6920-:d:1454866
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    References listed on IDEAS

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    1. Harry DeAngelo & Andrei S Gonçalves & René M Stulz, 2018. "Corporate Deleveraging and Financial Flexibility," The Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 3122-3174.
    2. Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006. "Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures," Financial Management, Financial Management Association International, vol. 35(3), pages 97-116, September.
    3. Sudheer Chava & Dmitry Livdan & Amiyatosh Purnanandam, 2009. "Do Shareholder Rights Affect the Cost of Bank Loans?," The Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 2973-3004, August.
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