IDEAS home Printed from https://ideas.repec.org/a/spr/jknowl/v16y2025i2d10.1007_s13132-024-02255-7.html
   My bibliography  Save this article

ESG Performance and the Cost of Debt of Chinese Firms: Do Board Idiosyncrasies Matter?

Author

Listed:
  • Naiping Zhu

    (Jiangsu University)

  • Abdullah

    (Jiangsu University)

  • Muhammad Arsalan Hashmi

    (Dow University of Health Sciences)

  • Muhammad Hashim Shah

    (Southwest Jiaotong University)

  • JinLan Yang

    (Jiangsu University)

Abstract

The ESG paradigm has exerted increasing pressure on Chinese firms to adopt environment-friendly and socially responsible policies as part of their governance framework. Despite its importance, limited attention has been given to the relationship between ESG performance and the cost of debt (COD) and whether board traits influence this relationship. Therefore, this study addresses this gap by analyzing the moderating influence of board size and independence on the relationship between ESG performance and the cost of debt using a two-way interaction approach. We also investigate whether board diversity (i.e., age, gender, education, and culture) complements board size and independence in strengthening the negative relationship between ESG performance and COD using the three-way interaction approach. The study employed two-stage least squares and two-step GMM estimation techniques using a sample of Chinese non-financial firms. The two-way interaction results suggest that large and independent boards have a moderating effect and influence the negative relationship between ESG and COD. Furthermore, the three-way interaction results suggest that board diversity complements large and independent boards by strengthening the negative impact of ESG on COD. This effect of board diversity is present when the board of directors possesses age, gender, educational, and cultural diversity. Interestingly, our analysis also indicates that ESG performance is beneficial for both environmentally sensitive and non-sensitive firms but has more profound benefits for environmentally sensitive firms.

Suggested Citation

  • Naiping Zhu & Abdullah & Muhammad Arsalan Hashmi & Muhammad Hashim Shah & JinLan Yang, 2025. "ESG Performance and the Cost of Debt of Chinese Firms: Do Board Idiosyncrasies Matter?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 9684-9714, June.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:2:d:10.1007_s13132-024-02255-7
    DOI: 10.1007/s13132-024-02255-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13132-024-02255-7
    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/s13132-024-02255-7?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:jknowl:v:16:y:2025:i:2:d:10.1007_s13132-024-02255-7. 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.