Unraveling the influence of ESG performance on working capital management: An empirical analysis of a global panel dataset

This study investigates the impact of environmental, social, and governance (ESG) practices on working capital management (WCM) with a global sample of nonfinancial firms from 2004 to 2023. We hypothesize that ESG performance has a positive impact on WCM. Using a sample of 8350 firms in 73 countries, we perform panel data regressions and employ the generalized method of moments (GMM) as robustness check and to address endogeneity issues. Our results reveal that ESG performance, proxied by the combined ESG score, has a significantly negative impact on the cash conversion cycle (CCC). The majority of other ESG scores demonstrate a similar pattern, although some results are insignificant. The study contributes to the empirical literature on the impact of ESG performance by including multiple ESG dimensions and a large global sample. The findings have practical implications for managers and policy makers.