IDEAS home Printed from https://ideas.repec.org/a/spr/endesu/v27y2025i6d10.1007_s10668-023-04443-y.html
   My bibliography  Save this article

Corporate underinvestment and its effects on environmental, social, and governance performance

Author

Listed:
  • Mingyao Cao

    (Universiti Sains Malaysia
    National University of Singapore)

  • Keyi Duan

    (Universiti Sains Malaysia
    University of North Carolina at Chapel Hill)

  • Haslindar Ibrahim

    (Universiti Sains Malaysia)

Abstract

This research examines the impact of corporate underinvestment on environmental, social, and governance (ESG) performance, using data from A-listed companies in China spanning the period 2011–2020. By disaggregating ESG into its three components, namely environmental, social, and governance factors, this study aims to determine the specific influence of underinvestment on each aspect. Employing ordinary least squares and two-stage least squares methods, the empirical results reveal a negative correlation between underinvestment and ESG ratings, particularly in the environmental and social dimensions. Further analysis shows that the effects vary among state-owned enterprises (SOE) and non-state-owned enterprises (NSOE), as well as companies facing different financing constraints. Notably, SOE and entities with significant financing limitations experience a more pronounced decline in ESG evaluations due to underinvestment tendencies. The findings of this research provide valuable insights for ESG-related policy and strategic adjustments, enhancing our understanding of the consequences of underinvestment on ESG metrics. It also provides a micro-level analysis of the dynamics within Chinese corporations and sheds light on the divergent effects based on different enterprise characteristics.

Suggested Citation

  • Mingyao Cao & Keyi Duan & Haslindar Ibrahim, 2025. "Corporate underinvestment and its effects on environmental, social, and governance performance," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(6), pages 13755-13775, June.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:6:d:10.1007_s10668-023-04443-y
    DOI: 10.1007/s10668-023-04443-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10668-023-04443-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10668-023-04443-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:endesu:v:27:y:2025:i:6:d:10.1007_s10668-023-04443-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.