Moving Toward Sustainable Finance: Leveraging Environment, Social and Governance (ESG) Performance and Risk Management to Drive Corporate Financing Efficiency

Li Li; Muhammad Suhrab; Magdalena Radulescu; Mariana Banuta

doi:10.5755/j01.ee.36.1.36361

Authors

Li Li School of Accounting, Guangzhou College of Commerce, China https://orcid.org/0009-0008-6500-1246
Muhammad Suhrab School of Management, Huazhong University of Science and Technology (HUST), China https://orcid.org/0000-0002-6680-7494
Magdalena Radulescu Institute of Doctoral and Post-Doctoral Studies, University Lucian Blaga of Sibiu, Romania; UNEC Research Methods Application Center, Azerbaijan State University of Economics (UNEC), Azerbaijan https://orcid.org/0000-0002-4050-8170
Mariana Banuta National University of Science and Technology Politehnica Bucharest, Romania

DOI:

https://doi.org/10.5755/j01.ee.36.1.36361

Keywords:

Environmental, Social, Governance, ESG, Corporate financing efficiency, Corporate financial risk, Sustainable finance

Abstract

The growing demand for companies to adopt environmentally sustainable and ethical practices has led to a greater focus on the organization's environmental, social, and governance accomsplishments. This study aims to investigate the relationship between environmental social and governance (ESG) and corporate financial risk (CFR) on corporate finance efficiency (CFE) in China, using a dataset of 400 Chinese firms registered on the Shanghai and Shenzhen A-share exchanges between 2013 and 2022, the analysis uses a data envelopment analysis (DEA) model with entity-fixed effects regression and a robustness test. The findings show a positive relationship between ESG and corporate finance efficiency, implying that promoting ESG practices can boost corporate financing efficiency. However, the study also found the negative effect of high financial risk on corporate financing efficiency. These findings have significant implications for businesses, investors, and policymakers. Businesses can enhance their long-term financial performance by giving ESG practices top priority and controlling financial risks. Policymakers can utilize these findings to encourage businesses to enhance their ESG practices and risk management to increase overall financing efficiency.

Author Biographies

Li Li, School of Accounting, Guangzhou College of Commerce, China

Li Li is a senior lecturer in Accounting and Finance at the School of Accounting, Guangzhou College of Commerce, China. She received her master’s degree from Guangdong University of Technology and started her PhD program at Universiti Teknologi Malaysia. Her research focuses on various areas, including ESG disclosure, board diversity, corporate governance, and sustainability disclosure. Her articles have been published in journals such as Business Strategy and Development and the International Journal of Academic Research in Business and Social Sciences. In July 2014, Li Li led a subject project for the 14th Five-Year Plan of the Guangdong Higher Education Society titled ESG Accounting Talent Cultivation Model in the Context of New Quality Productivity. ORCID: https://orcid.org/0009-0008-6500-1246.

Muhammad Suhrab, School of Management, Huazhong University of Science and Technology (HUST), China

Muhammad Suhrab is a Ph.D. student at the School of Management, Huazhong University of Science and Technology (HUST), Wuhan, China. He remained a lecturer at ILMA University Pakistan and is now associated with the university as a research associate. He has published high-quality papers in different top journals. He is serving as part of the editorial team for the Journal of Effective Teaching Methods. ORCID: https://orcid.org/0000-0002-6680-7494.

Magdalena Radulescu, Institute of Doctoral and Post-Doctoral Studies, University Lucian Blaga of Sibiu, Romania; UNEC Research Methods Application Center, Azerbaijan State University of Economics (UNEC), Azerbaijan

Magdalena Radulescu* is a Full Professor at Department of Finance, Accounting and Finance, National University of Science and Technology Politehnica Bucharest, University of Pitesti Romania. She authored more than 100 papers in IF journals indexed in WOS. H-index 30. She was included in World Top 2 % Scientists by Standford University in 2024. ORCID: https://orcid.org/0000-0002-4050-8170

Mariana Banuta, National University of Science and Technology Politehnica Bucharest, Romania

Mariana Banuta is a Lecturer PhD at the Department of Finance, Accounting, and Finance at the National University of Science and Technology Politehnica Bucharest, University of Pitesti Romania. She graduated from the Faculty of Accounting at the University of West Timisoara, Romania. She has authored numerous papers indexed in international databases.