Work

The Moderating Role of Ownership Concentration on Financing Decisions and Firm’s Sustainability: Evidence from China

Year: 2023

Type: article

Abstract: We examined the impact of financing decisions on a firm’s sustainability in China as it aspires to achieve carbon neutrality. To proxy firms’ sustainability performance, we proposed an index for environmental, social, and governance (ESG) performance. The financing decision was proxied by debt funding and equity funding. Using secondary data from China Stock Market Accounting Data from 2016 to 2022, we utilize the fixed effect and fully modified ordinary least squares estimators for the empirical analysis. The analysis indicated a favorable link between debt funding and ESG performance. We uncovered an inconsistent association between equity funding and ESG performance. Moreover, ownership concentration revealed a significant role in moderating the impact of debt financing and ESG performance in China. The findings affirm that firms should rely on debt funding rather than equity funding to enhance their ESG performance. Hence, policymakers should enact laws allowing easy access to debt funding for companies to ensure higher ESG performance. This, in the long term, will contribute to the Chinese dream of carbon neutrality.

Source: Sustainability

DOI: 10.3390/su151813385

Authors: Kankan Wen, Andrew Agyemang, Noha Alessa, Inusah Sulemana, Abednego Osei

Institutions: Ningxia Normal University, Simon Diedong Dombo University of Business and Integrated Development Studies, Princess Nourah bint Abdulrahman University, Jiangsu University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Climate action

Open Access status: gold

Estimated APC paid: $2,447