ESG and Financial Constraints

Prior evidence that firm’s environment, society and governance (ESG) performance has a positive impact on its investment behavior, leaves unaddressed whether it has the same impact on corporate financing constraints. Drawing on stakeholder theory and Information asymmetry theory, this study analyzes the issue in a more exhaustive way. Use Chinese A-share listed companies samples from 2009 to 2020, the author analyzes the relationship between ESG performance and financing constraints, and finds that firms with better ESG performance, measured by high ESG ratings, face less financing constraints. This study helps to clarify the economic significance of ESG performance, provides empirical basis for listed companies to attach importance to and improve ESG performance, and has implications for government departments to formulate relevant policies to improve the efficiency of capital allocation and promote high-quality economic development