Does ESG Performance Help Corporate Deleveraging? Based on an Analysis of Excessive Corporate Debt

The ESG performance of enterprises is becoming an essential form of support for investors’ investment decisions and a critical aspect to follow to achieve sustainable development of enterprises. This study uses A-share listed companies in China from 2009 to 2022 as the research sample to study the impact of ESG performance on corporate over-indebtedness and its mechanism. The findings show that good ESG performance significantly negatively affects the level of corporate over-debt and the probability of over-debt. The mechanism test revealed that ESG performance reduces the level and probability of excessive corporate debt by alleviating information asymmetry, reducing corporate debt financing costs and short-term debt length, and improving corporate operating performance. The heterogeneity analysis indicates that the inhibitory effect of ESG performance on corporate over-indebtedness is more significant in polluting industries and regions with a low degree of marketization. Through the moderating effect, we find that improved internal control quality and increased analyst attention can enhance the inhibitory effect of ESG performance on excessive corporate debt. Based on the results above, enterprises should focus on improving ESG performance to reduce the risk of excessive debt and achieve sustainable development. This paper enriches the research on ESG performance and corporate leverage manipulation from the perspective of corporate over-indebtedness, deepens and expands the research on the mechanism of ESG performance affecting corporate over-indebtedness, and explores the moderating effect of internal and external governance mechanisms on ESG performance affecting corporate over-indebtedness.