How ESG performance alleviates corporate financing constraints: evidence from China’s A-share market

Abstract

Using data on Chinese A-share listed firms from 2009 to 2023, this study examines whether and how ESG performance affects corporate financing constraints. The results show that better ESG performance significantly alleviates financing constraints. This conclusion remains valid after addressing potential endogeneity through 2SLS estimation and propensity score matching, and is further supported by other robustness tests. Mechanism tests provide evidence consistent with four potential channels: enhanced corporate reputation, improved information transparency, stronger internal control quality, and persistent green innovation. The financing benefits of ESG are more pronounced among state-owned enterprises, firms located in central and western China, and high-tech firms. Environmental governance costs significantly weaken these benefits, indicating that the ESG–financing relationship is conditional rather than uniformly beneficial. Further analysis shows that the environmental and governance dimensions significantly alleviate financing constraints. Overall, the findings highlight both the financing value and boundary conditions of ESG performance in emerging markets.