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Does ESG Performance Enhance Financial Flexibility? Evidence from China

Author

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  • Dingzu Zhang

    (School of Economics and Management, Changsha University of Science and Technology, Changsha 410004, China)

  • Luqi Liu

    (School of Economics and Management, Changsha University of Science and Technology, Changsha 410004, China)

Abstract

Environmental, social, and governance (ESG) performance may be one of the strategies firms adopt to enhance their financial flexibility in response to an increasingly uncertain environment and difficult sustainability conditions. We use A-share listed firms in China from 2015 to 2020 as samples to test the influencing mechanism of ESG performance on financial flexibility. The empirical results indicate that ESG performance significantly enhances financial flexibility. The mechanism results show that financing constraints mediate ESG performance and firms’ financial flexibility. The additional analysis suggests that environmental uncertainty and market attention have significant positive moderating effects. That is, the promotion effect of firms in high uncertainty environments is more apparent, and the same is true in high market attention. This study supports instrumental stakeholder theory, signaling, and social impact hypothesis. It has enlightenment significance for firms, investors, and creditors to evaluate ESG performance and government departments to formulate relevant policies.

Suggested Citation

  • Dingzu Zhang & Luqi Liu, 2022. "Does ESG Performance Enhance Financial Flexibility? Evidence from China," Sustainability, MDPI, vol. 14(18), pages 1-22, September.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:18:p:11324-:d:910971
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    Cited by:

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    2. Ersin Yenisu & Sedat Yenice & Diler Türkoğlu, 2026. "Do Sustainability Activities Effect Market Value Linearly or Curvilinearly? A Review of European Banks," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 33(1), pages 1003-1015, January.
    3. Jiang, Yihuo & Ni, Hongliang & Ni, Yihan & Guo, Xiaomei, 2023. "Assessing environmental, social, and governance performance and natural resource management policies in China's dual carbon era for a green economy," Resources Policy, Elsevier, vol. 85(PB).
    4. Michael C. S. Wong & Wei Li, 2024. "Investigating ESG Funds in China: Management Fees and Investment Performance," IJFS, MDPI, vol. 12(2), pages 1-21, April.
    5. Fan, Yali & Wang, Ruofei & Alkaraan, Fadi & Wu, Wei, 2025. "Decoding greenwashing practices toward sustainability: The synergistic influence of governance structure and policy-derive rhetorical strategies," Energy Economics, Elsevier, vol. 148(C).
    6. Defang Ma & Liangwei Li & Yuxi Song & Mengkai Wang & Qiaowen Han, 2023. "Corporate Sustainability: The Impact of Environmental, Social, and Governance Performance on Corporate Development and Innovation," Sustainability, MDPI, vol. 15(19), pages 1-16, September.
    7. Shi, Dinghao & Tan, Haoyu & Ling, Yixin & Liu, Yunuo & Liu, Bo & Tu, Yongqian, 2025. "Impact of environmental information uncertainty and market competition on corporate ESG performance," International Review of Financial Analysis, Elsevier, vol. 99(C).
    8. Muhammad Istiaque Hossain & Baolei Qi & Mohamed Marie & Mohamed Omran & Yucheng Chen, 2025. "Financial sustainability in the context of ESG disclosure: A comprehensive analysis of Chinese‐listed firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(2), pages 2438-2457, March.
    9. Arnone, Massimo & Costantiello, Alberto & Drago, Carlo & Leogrande, Angelo, 2025. "ESG Drivers of Financial Development: A Multimethod Analysis of Domestic Credit to the Private Sector," MPRA Paper 127044, University Library of Munich, Germany.
    10. Mohamed Marie & Baolei Qi & Ahmed A. Elamer & Ibrahim N. Khatatbeh & Eltayyeb Al‐Fakir Al Rabab'a, 2025. "How does board gender diversity drive the ESG performance‐cash holdings relationship? Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 2705-2723, July.
    11. Hu, Jiamin & Li, Kailun & Xia, Yifei & Zhang, Jianing, 2023. "Gender diversity and financial flexibility: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    12. Yuping Song & Lu Lu & Jingxuan Liu & Jingyi Zhou & Xin Wang & Fangfang Li, 2025. "A Study of the Factors Contributing to the Impact of Climate Risks on Corporate Performance in China’s Energy Sector," Sustainability, MDPI, vol. 17(11), pages 1-26, June.
    13. Liang, Zhidong & Yang, Xiao, 2024. "The impact of green finance on the peer effect of corporate ESG information disclosure," Finance Research Letters, Elsevier, vol. 62(PA).
    14. Ying Wang & Satoru Shimokawa, 2026. "Does ESG Matter for Unlisted Companies in the Agri‐Food Industry? Evidence From Japan's Unlisted Agri‐Food Companies," Agribusiness, John Wiley & Sons, Ltd., vol. 42(2), pages 516-533, April.
    15. Yuan Zheng & Mazni Abdullah & Nurliana Md Rahin, 2025. "Environmental, Social, and Governance (ESG) Performance and New Quality Productivity in China: The Mediating Role of Patient Capital," SAGE Open, , vol. 15(4), pages 21582440251, November.
    16. Chai, Jingmin & Meng, Tiantian, 2026. "The impact of ESG practices on value chain upgrading across lifecycle stages: Evidence from China's capital market," International Review of Economics & Finance, Elsevier, vol. 105(C).
    17. Yang Yang & Jinmian Han, 2023. "Digital transformation, financing constraints, and corporate environmental, social, and governance performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3189-3202, November.
    18. Maria Fernanda Bernal Salazar & Elisa Baraibar-Diez & Jesús Collado-Agudo, 2025. "CSR and Corporate Sustainability: Theoretical and Empirical Approaches Based on Data Science in Spanish Tourism Companies," Sustainability, MDPI, vol. 17(6), pages 1-35, March.
    19. Zhi Chen & Jinfeng Yang & Peigong Li & Stavros Sindakis, 2024. "Navigating the Knowledge Economy: Unraveling the Impact of Executive Policy Cognition on ESG Performance in China’s A-Share Listed Companies," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 15788-15832, December.
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    21. Anrong Gao & Tianren Xiong & Yuxi Luo & Defeng Meng, 2023. "Promote or Crowd Out? The Impact of Environmental Information Disclosure Methods on Enterprise Value," Sustainability, MDPI, vol. 15(4), pages 1-19, February.
    22. Hansol Choi & Hyemi Lee, 2025. "A Meta‐Analytic Review of the Relationship Between Environmental Dimensions of ESG Management and Purchase Intentions in South Korea," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(6), pages 8367-8379, December.

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