Structure of interest-bearing liabilities and corporate ESG performance

Abstract

Using sample data from all Chinese A-share manufacturing listed companies from 2017 to 2022, this study investigates the impact of interest-bearing liability structure on corporate environmental, social, and governance (ESG) performance. Findings show that a substantial negative correlation exists between the amount of interest-bearing liabilities, ratio of short-term to interest-bearing borrowings, ratio of long-term to interest-bearing borrowings, and corporate ESG performance. This implies that as corporate interest-bearing liabilities increase, their ESG performance tends to decline. Furthermore, a higher amount of interest-bearing liabilities inhibits corporate research and development investment, affecting performance in technical innovation, environmental protection, and social responsibility and thus lowering ESG performance. Furthermore, this study determines that the cash-holding ratio negatively moderates the inhibitory influence of interest-bearing liability structure on corporate ESG performance.