Corporate Financial Constraints Research Articles

Can Digital Economy Development Facilitate Corporate ESG Performance?

As ESG (environmental, social, and corporate governance) is consistent with the spirit of sustainable development, it is useful to elevate ESG performance to realize the sustainable development of enterprise and society. Using the data of Chinese A-share listed firms in the period of 2011 to 2019, this paper takes the National Big Data Comprehensive Pilot Zone policy as a quasi-natural experiment and uses the difference-in-differences method to assess the effect of digital economy development on ESG performance. This paper reveals the following: (1) the digital economy can facilitate ESG performance; (2) digitalization of the economy helps enterprises to propel digital transformation, which in turn lifts ESG performance; (3) digital economy development has a deeper impact on private enterprises, especially for those in China’s capital cities; and (4) digital economy development moderates the inhibiting effect of ESG performance on corporate financial constraints. The findings of this paper indicate that digitalization of the economy can help to achieve sustainable development.

Foreign shareholding and corporate environmental expenditure: Evidence from China

AbstractThis paper estimates the effects of foreign investments on the environmental expenditure of listed companies in China by differentiating pre‐IPO foreign investors from post‐IPO foreign investors. Our findings indicate that while pre‐IPO foreign investments make significant and positive contributions, the influence of post‐IPO foreign investments is negligible. These results are particularly pronounced for enterprises that are privately owned, located in coastal China, operating in heavily polluting industries, and whose management lacks prior experience in environmental protection and international vision. Furthermore, research efforts are devoted to uncovering potential channels through which pre‐IPO foreign investments affect corporate environmental expenditure, including environmental regulations in home countries or regions, government attention to environmental issues, media coverage, and corporate financial constraints.

A study on the impact of ESG rating on green technology innovation in enterprises: An empirical study based on informal environmental governance

Improving corporate green technology innovation is a key link in achieving green transformation and development. Compared with formal environmental regulations that force companies to carry out green innovation passively, ESG ratings under soft environmental regulations can better stimulate the internal motivation of companies. This study uses the ESG ratings of listed companies published for the first time by SynTao Green Finance as an exogenous impact. Taking China's A-share listed companies from 2011 to 2022 as a research sample, the multi-period differences-in-differences model was used to empirically test the impact of ESG rating soft supervision on corporate green technology innovation. The results show that the impact of ESG rating events as a soft market regulation has a significant positive impact on the improvement of corporate green technology innovation. This conclusion still holds after a series of robustness tests. Meanwhile, enterprise digital transformation plays a positive regulatory role. The heterogeneity test shows that the green technology innovation of state-owned enterprises is more affected by ESG ratings. Mechanism research has found that ESG rating events promote corporate green technology innovation by easing corporate financing constraints and reducing managerial myopia. Further research found that under the influence of the external environment, intensified market competition and increased attention from the capital market are also conducive to the improvement of corporate green technology innovation. This study strengthens the corporate ESG concept under the guidance of green development and provides empirical evidence for promoting corporate green transformation.

Corporate mergers and acquisitions: A strategic approach to mitigate expected default frequency

This study investigates the influence of corporate mergers and acquisitions on debt default risk by analyzing a dataset of 14,990 A-share listed companies from 2010 to 2021. The results demonstrate that corporate mergers and acquisitions effectively mitigate expected default frequency, a conclusion that withstands a variety of robustness checks. Through mechanism testing, it's found that mergers and acquisitions alleviate corporate financing constraints and boost information transparency, subsequently lowering debt default risk. The heterogeneity analysis further reveals that this mitigating effect is particularly pronounced in younger companies, those with weaker internal governance, and companies situated in less marketized regions.

Corporate Financing Constraints, Working Capital Management, and Corporate Investment—An Analysis Based on Manufacturing Industry Data of A-share Listed Companie

Corporate Financing Constraints, Working Capital Management, and Corporate Investment—An Analysis Based on Manufacturing Industry Data of A-share Listed Companie

Corporate Financing Constraints, Working Capital Management, and Corporate Investment—An Analysis Based on Manufacturing Industry Data of A-share Listed Companie

Corporate Financing Constraints, Working Capital Management, and Corporate Investment—An Analysis Based on Manufacturing Industry Data of A-share Listed Companie

Commercial bank digital transformation, information costs, and corporate financial constraints

ABSTRACT The rapid development of digital finance has transformed traditional financial institutions. We investigate the effect and economic consequences of bank digital transformation on corporate financial constraints using data from China. The results show that bank digital transformation alleviates corporate financial constraints by decreasing information search, processing, and verification costs. Furthermore, the effect of bank digital transformation on corporate financial constraints is more pronounced for firms with higher contract intensity, more intangible assets, and poorer external information environment. We also find that bank digital transformation alleviates corporate financial constraints by increasing debt financing. In addition, we show that digital transformation promotes lending by big banks, resulting in the crowding-out effect. Finally, we find that bank digital transformation promotes the flow of credit resources to non-zombie firms, which effectively improves credit allocation efficiency. This paper extends research on digital finance and new structural finance from the perspective of bank digital transformation.

Are women greener? Board gender diversity and corporate green technology innovation in China

This article investigates how board gender diversity impacts corporate green technology innovation, and whether regional gender contexts as well as corporate financial constraints moderate this relationship. Using a panel of 20,834 firm-year observations of China, the results indicate a statistically significant positive association between board gender diversity and corporate green technology innovation. Specifically, the study finds that boards with three or more female directors have a stronger positive effect on green technology innovation than boards with two or fewer female directors, in line with the critical mass theory. Besides, the result shows that the effect of female executive directors outweighs that of female independent directors. Further, the positive association between female directors and green technology innovation is found to be more pronounced in firms located in regions with higher levels of gender equality and higher proportions of women in politics, while financial constraints act to alleviate the extent of the positive relationship. Additionally, female directors play a potent role in reducing corporate carbon emissions, particularly for high-polluting firms and those located in regions with stricter environmental regulation. The key results remain unchanged after correcting for endogeneity concern. Overall, this study has substantial practical implications and provides valuable insights for managers and policymakers regarding the contribution of female leadership in enhancing corporate environmental performance.

Bank digitalization and corporate green innovation: empowering or negative?

In the context of bank digitalization construction, this paper explores the impact and mechanism of bank digital transformation on corporate green innovation based on the data of listed enterprises from 2010 to 2021. It is found that bank digital transformation enhances the overall and strategic nature of corporate green innovation but has no significant impact on corporate substantive green innovation. The mechanism analysis shows that bank digital transformation can promote corporate green innovation by inhibiting corporate financialization and alleviating corporate financing constraints. Government environmental regulation and media attention have a positive moderating effect on the relationship between banks’ digital transformation, and enterprises’ green innovation, i.e., an increase in the level of government environmental regulation and an increase in media attention will strengthen the promotion effect of banks’ digital transformation on enterprises’ green innovation. Heterogeneity analysis shows that the promotion effect of banks’ digital transformation on corporate green innovation is more significant for state-owned enterprises, heavily polluted enterprises, large-scale enterprises, and enterprises in the eastern region. Therefore, the digital transformation of banks can “empower” the green innovation of enterprises, help the green development of enterprises, and lead the high-quality development of the economy. At the same time, the study’s results also show that the green development of enterprises should not be “superficial” but “substantial.”

Does Investor Attention Affect Corporate Greenwashing? Evidence from China

Abstract Enhancing ESG performance has emerged as a crucial strategy for companies to bolster market value and competitiveness. However, this trend has sparked concerns about corporate greenwashing, where companies may selectively disclose ESG-related information to garner short-term benefits. Against this backdrop, using Chinese A-share listed companies from 2010 to 2022, we examine the impact of investor attention on corporate greenwashing. The findings reveal that investor attention significantly curbs corporate greenwashing. Mechanism analysis indicates that investor attention achieves this by alleviating corporate financing constraints and enhancing transparency in corporate information. Furthermore, moderating analysis suggests that enhancing internal controls and increasing environmental subsidies can strengthen the inhibitory effect of investor attention on corporate greenwashing. Finally, heterogeneity analysis demonstrates that the inhibitory effect of investor attention on corporate greenwashing is more pronounced in state-owned enterprises and companies facing high financing constraints. These findings not only contribute to the literature on investor attention but also offer insights for governing corporate greenwashing and advancing the dual-carbon goal. Keywords: Investor attention, Corporate greenwashing, Internal controls, Environmental subsidies, China.

Information Infrastructure and Environmental, Social, and Governance Performance of the Enterprise: A Quasi-Experimental Analysis

ABSTRACT Information infrastructure development substantially impacts the transformation of enterprises’ decision-making. Based on the “Information Consumption Demonstration City Construction” policy issued by the Chinese Ministry of Industry and Information Technology in 2016, we conducted a quasi-experiment to examine the effects and mechanisms of information infrastructure construction on the enterprise’s environmental, social, and governance (ESG) performance. Overall, information infrastructure construction was shown to substantially improve the ESG performance of these companies and exhibit a strong promoting effect on labor-intensive and state-owned enterprises. Regarding internal mechanisms, the information infrastructure has accelerated the digital transformation of enterprises and improved information efficiency, which is beneficial for suppressing opportunistic behavior. Regarding external mechanisms, information infrastructure development and ESG investment have jointly reduced corporate financing constraints, improving their credit market performance. These findings provide substantial practical evidence for promoting the construction of an information infrastructure from the perspective of enterprise governance transformation.

Negative Media Coverage and Corporate ESG Performance: Evidence from China

Using Chinese A-share listed companies from 2011 to 2020 as a research sample, this paper examines the relationship between negative media coverage and corporate ESG performance using a two-way fixed-effects model. It is found that, first, negative media coverage can effectively promote corporate ESG performance. Second, the mediation mechanism study shows that negative media coverage positively promotes corporate ESG performance by increasing the degree of corporate financing constraints and information asymmetry and prompting corporations to change their ESG governance level. Third, the results of the heterogeneity test find that the positive relationship between negative media coverage and corporate ESG performance is more pronounced among firms without executives with overseas backgrounds, and the positive relationship between the two is more significant after the promulgation of China’s Code of Governance for Listed Companies in 2018. Fourth, further discussion revealed that negative media coverage has the strongest promotion effect on the performance of corporate environmental governance, followed by social governance performance, and lastly, corporate governance performance. The research in this paper contributes to an in-depth understanding of the impact of negative media coverage on corporate ESG performance and provides empirical evidence to facilitate policy formulation related to the role of media monitoring and to fully utilize the media’s role in corporate ESG governance.

The effect of ESG on enterprise value under the dual carbon goals: From the perspectives of financing constraints and green innovation

Environmental, Social, and Governance (ESG) is an important criterion for evaluating non-financial indicators of firm performance, offering substantial support for advancing green transformation. This paper examines the impact of ESG performance on enterprise value using data from 3139 Chinese A-listed companies spanning from 2010 to 2021. The results demonstrate that enhancing ESG performance significantly boosts enterprise value. Additionally, ESG initiatives can alleviate corporate financing constraints and stimulate green innovation, consequently driving enterprise value. Furthermore, the positive effect of ESG on enterprise value is more pronounced for non-state-owned enterprises, low-polluting enterprises, and small-scale enterprises. These findings deepen our understanding of how ESG influences enterprise value within the context of the dual-carbon goal, offering theoretical backing for companies and investors to bolster ESG management practices and aiding government efforts to enhance ESG macro guidance.

Economic policy uncertainty and the inhibitory effect of firms' green technology innovation

Given the potential unforeseen impacts of environmental regulation changes on the innovative activities of micro agents, it is crucial to examine the effects of economic policy uncertainty (EPU) on business development. Several studies have shown that uncertainty acts as a hindrance and can hinder business innovation. This study utilizes data from 807 listed companies spanning from 2007 to 2019 and employs a double fixed-effects model to investigate the influence of EPU on enterprises' green technology innovation activities. The results reveal that EPU decreased firms' green technology innovation. Moreover, EPU inhibits corporate green technology innovation by increasing corporate financing constraints. Thus, financing constraints mediate between EPU and enterprises' level of green technology innovation, with increased market competition reducing the inhibiting effect of EPU on innovation. Furthermore, EPU decreases green technology innovation more among nonstate-owned and low-tech businesses than state-owned and high-tech businesses. This paper reveals the intrinsic mechanism of EPU on firms' innovation, clarifies the technological innovation process, and provides insights into governmental environmental governance from the perspective of EPU.

Do environmental target constraints promote corporate pollution reduction?

In order to improve the environment quality, in 2007 the Chinese government implemented a policy document on environmental target constraints called the ‘Letter of Responsibility’. Based on this impact, we collect the environmental target constraints (ETC) data of 276 cities in China, and use the Differences-in-Differences (DID) method to evaluate the impact of local government ETC on enterprise pollution. The results show that ETC can significantly curb the pollution emission level of enterprises. This effect varies significantly between enterprises of different regions, scales, ownerships, and total factor productivities (TFPs). ETC can promote enterprise emission reduction by inducing green innovation, improving corporate tax burden and financing constraints, and promoting enterprise exit. Economic growth target constraints will weaken the inhibitory effect of ETC on corporate pollution. This paper provides important empirical evidence for deepening China’s official environmental assessment system and environmental governance.

How does the marketization of public resources alleviate corporate credit mismatches?

Market-oriented allocation of public resources is crucial for supporting the high-quality development strategy of Chinese-style modernization. This paper examines how the market-oriented allocation of public resources affects the credit mismatches of enterprises in different cities by focusing on establishing public resource trading centers in China. The analysis is based on listed firms from 2010 to 2022. A multi-period difference-in-difference model is employed to explore the effects and underlying mechanisms. The findings indicate that marketization of public resources can effectively alleviate corporate credit mismatch, and the impact is achieved by mitigating corporate financing constraints and information asymmetry.

Does green technology transformation alleviate corporate financial constraints? Evidence from Chinese listed firms

Green technology transformation is crucial for China to achieve its carbon peak and carbon neutrality goals. We use green transformation keywords extracted from the annual reports of listed firms to construct a green technology transformation intensity index for enterprises and investigate the impact of green technology transformation on corporate financial constraints. Our findings indicate that green technology transformation significantly mitigates corporate financial constraints, with green subsidies and debt financing as crucial mechanisms. Moreover, this effect is particularly pronounced in high-carbon-intensity industries, firms with fewer political connections, and firms affected by the carbon trading pilot. Additionally, digital and green transformations have a synergistic effect on alleviating corporate financial constraints. Therefore, we should promote the green technology transformation of enterprises and guide green finance to serve the real economy, effectively solve the financing dilemma of green enterprises, and provide strong green kinetic energy for sustainable development.

The rise of common state ownership and corporate environmental performance

This study assesses the effect of common state ownership on corporate environmental performance. Using a large sample of Chinese listed firms, we find that state-owned common ownership leads to significantly enhanced corporate environmental performance. Our mechanism analysis indicates that state-owned common owners promote environmental-friendly practices through resource allocation mechanisms that alleviate corporate financial constraints. In addition, these owners play a leadership role in fostering corporate green innovation and enhancing the overall performance of the industry. Specifically, common state ownership leads to higher industry's green total factor productivity and profitability. Moreover, we observe that the positive relationship between common state ownership and corporate environmental performance is more pronounced in firms without politically connected CEOs/chairpersons and in privately owned firms.

Non-mandatory approaches to corporate environmental engagement: Insights from the Belt and Road Initiative

We investigate the impact of the Belt and the Road Initiative (BRI) proposal on environmental investments made by listed firms within China's heavy-polluting industry. Using a difference-in-differences approach, we find that the BRI proposal results in a 81.53% increase in environmental investment made by firms located in provinces along the BRI route. Mechanism analyses suggest that government subsidies for firms' environmental protection activities alleviate corporate financial constraints, thereby providing them with the financial capacity for environmental protection. We further show heterogeneous effects across ownerships and the severity of agency issues. Overall, the results suggest that a combination of non-mandatory measures and financial incentives can effectively promote corporate engagement in environmental protection efforts.

How does military-civilian integration development influence corporate financial constraints in China? Evidence based on quasi-natural experiments

This paper employs data of Chinese listed companies from 2009 to 2019 to determine the influence of the military-civilian integration strategy on corporate financial constraints. The study found the level of financial constraints of military enterprises to improve following the implementation of the military-civilian integration development strategy. Compared with private and small enterprises, the financial constraints of state-owned and large enterprises are more prominent, while the financial constraints of enterprises in the western region have increased more obvious. Further mechanism analysis revealed that the enhanced corporate financial constraints induced by the military-civilian integration are mainly reflected in the tightening of internal financing. Furthermore, we evaluated the total factor productivity changes of enterprises before and after the implementation of the military-civilian integration strategy. The results determine that the development of military-civilian integration facilitates the improvement of the total factor productivity of enterprises.