ESG Performance and Corporate Performance in China’s Manufacturing Firms: The Roles of Trade Credit Financing and Environmental Information Disclosure Quality

This study examines the impact of environmental, social, and governance (ESG) performance on corporate performance in China’s manufacturing sector, incorporating trade credit financing as a mediator and environmental information disclosure quality as a moderator. Using unbalanced panel data from Chinese A-share listed manufacturing firms between 2011 and 2023 and employing two-way fixed effects models, we provide robust empirical evidence that superior ESG performance directly enhances corporate performance by reducing information asymmetry, strengthening corporate reputation, and lowering capital costs. Furthermore, we identify a key mediating mechanism: strong ESG practices improve access to trade credit financing—an efficient non-bank funding alternative—which alleviates financing constraints, optimizes resource allocation, and amplifies operational and financial outcomes. In a notable departure from conventional expectations, we find that high-quality information disclosure negatively moderates these relationships. Excessive disclosure induces signal overload and adverse selection, raising financing costs and external scrutiny that ultimately diminish the marginal benefits of ESG investments. Cross-sectional analyses reveal that these effects are particularly pronounced in non-state-owned enterprises, non-heavy-polluting industries, and firms located in eastern regions, highlighting the contextual boundaries of ESG efficacy. Our contributions are twofold: we theoretically advance the ESG-finance literature by unveiling trade credit as a transmission channel and revealing the unintended consequences of disclosure overload, and we offer practical guidance for firms seeking to optimize ESG disclosure strategies and for policymakers aiming to design targeted sustainable transition policies.