The Impact of ESG Ratings on Trade Credit Financing

Using a sample of Chinese listed companies from 2009 to 2020, this study investigates the impact of ESG ratings of listed companies on corporate trade credit financing. The results suggest that the performance of ESG ratings by listed companies can significantly improve the level of corporate trade credit financing. The positive effect of ESG rating on trade credit financing is more pronounced when the company hires a “Big4” auditor, or when the company locates in a region with a higher degree of marketization, and when the company is followed by more analysts. The results of the study still hold after the robustness test which uses the alternative measurement of dependent variables. The findings from this article enrich the research literature on the economic consequences of ESG ratings and factors influencing corporate trade credit financing. At the same time, it provides implications on how listed companies can improve their ESG ratings and how stakeholders can use ESG ratings for decision making