Debt distribution and ESG performance: Evidence from Chinese listed companies

Utilizing consolidated and parent company financial statement data from Chinese A-share listed companies from 2008 to 2022, this study empirically examines the impact of group debt distribution on ESG performance. The study reveals that as the proportion of debt financing assumed by the parent company increases, the ESG performance of the corporate group improves. After conducting endogeneity tests and other robustness checks, the research findings remain consistent. Further analysis shows that concentrated liabilities can improve the environmental, social, and governance performance of the group. Cross-sectional analysis demonstrates that the influence of concentrated liabilities on ESG performance is more pronounced in non-state-owned enterprises, during periods of high economic policy uncertainty, non-heavy pollution industry companies, when subsidiaries are geographically dispersed, and when there are more subsidiaries in various industries. This study provides empirical support for the positive externality of internal capital markets and offers valuable insights for ESG practices among listed companies.