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

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Title

I would recommend revising the title of the paper. As currently formulated, it suggests an analysis of the moderating variable only, whereas the text also introduces mediating variables.

I would also suggest including a reference to the Chinese context.

Introduction

The introduction should be strengthened to clearly explain the underlying motivation of the paper and the originality of the approach.

The development of the hypotheses needs to be better articulated. The three theories presented are not fully integrated with the formulation of the underlying hypotheses.

The figure that is supposed to provide support is not entirely clear. In the text, H3 is presented as the moderating hypothesis, whereas in the figure H3 also seems to indicate the mediating hypothesis.

Methodology

An improvement in the description of the sample is recommended to facilitate readability and understanding. For example, it is not clear what “ST companies” refers to. It might be useful to include a table that clarifies how the sample has been constructed.

It would be appropriate to justify the choice of the study period. Specifically, an explanation should be provided as to why the data were extracted for the years 2011 to 2023.

It would be appropriate to improve the description of how the variable “Information Disclosure Quality” was constructed. Specifically, it should be clarified where the data used to build these indicators were extracted from—was it from the sustainability report, the annual report, or other sources?

Results

The limitations of the study (for example, the external validity of results) should be included and should offer directions for future research.

Author Response

Comment 1: The title should be revised to reflect both mediating and moderating variables and include reference to the Chinese context.

Response: We thank the reviewer for this valuable suggestion. We have changed the title to: "ESG Performance and Corporate Performance in China’s Manufacturing Firms: The Roles of Trade Credit Financing and Information Disclosure Quality." This new title clearly indicates the Chinese context, the mediating role of trade credit financing, and the moderating role of information disclosure quality.

Comment 2: The introduction should be strengthened to better explain the motivation and originality of the study, and the hypotheses need better articulation and integration with theoretical frameworks.

Response: We have revised the introduction to more clearly articulate the research motivation and originality, emphasizing the research gaps in existing literature and highlighting China's manufacturing context. We have also restructured the hypothesis development section to ensure better integration with stakeholder theory, signaling theory, and information asymmetry theory.

Comment 3: The figure (Fig. 3.1) needs clarification to distinguish between mediating and moderating effects.

Response: We have revised Figure 3.1 to clearly distinguish between mediating and moderating effects, with H2 representing the mediating effect and H3-H5 representing moderating effects. The caption and accompanying text have been updated to avoid ambiguity.

Comment 4: The methodology section needs improvement in sample description, justification of study period, and construction of the information disclosure quality variable.

Response: We have improved the sample description by explicitly defining "ST companies" and including a new table (Table 4.1) summarizing the sample construction process. We have also added a justification for the study period (2011-2023) based on policy context and data availability. Furthermore, we have expanded the description of the information disclosure quality (IDQ) variable, clarifying the data sources and construction process.

Comment 5: The results section should include limitations and future research directions.

Response: We have added a new subsection titled "Limitations and Future Research Directions" in the conclusion section, discussing external validity, measurement challenges, endogeneity concerns, and specific directions for future research.

Reviewer 2 Report

Comments and Suggestions for Authors

This paper uses panel data regression methods to analyze the impact of ESG on corporate performance in Chinese firms. I think this paper can be improved in several aspects. I state my detailed comments and suggestions below.

 

1. Figure 1.1 on Page 2: Please describe the source of data used to draw this graph.

 

2. Page 9: As described on Page 9, the moderating variable is “Environmental Information Disclosure Quality”. However, in the title, abstract, and the hypothesis development section, the variable mentioned is “information disclosure quality”. Is “environmental information disclosure quality” equal to “information disclosure quality”? The logic of the variable selection does not seem very reasonable.

 

3. Page 12: Under Model (4.5), there is such a sentence “*(Note: The description mentions 𝑇𝐶𝑖,𝑡+1 in the interaction for (4.5), but the provided Chinese formula uses 𝑇𝐶𝑖,𝑡+1 The English model uses 𝑇𝐶𝑖,𝑡+1 to align with the provided equation structure. The lag/lead structure should be consistent with the theoretical rationale.)*”. It is unclear what this means.

 

4. Table 5.4 on Page 17: In the last row of the table, “Year FE” is mentioned. However, “Industry FE” is not mentioned. Please check whether “Industry FE” is included in the regression model.

 

5. Table 5.5 and Table 5.6: What does “Ind4 FE” mean in the last rows of the tables? Please check the number “4” there.

 

6. Line 99 on Page 19: It is mentioned that “Return on Assets (ROA) is selected as an alternative proxy”. However, as explained on Page 8, ROA was already used as the dependent variable. Is there a contradiction here?

 

7. Table 5.9 on Page 21: The t-value corresponding to the variable Cash in the column L.TC(3) is -0.94. However, the coefficient is marked by ***. There is a contradiction here.

 

8. List of references: The author first arranges the Chinese literature in alphabetical order by surname, followed by the English literature. This referencing style is inconsistent with the journal’s formatting guidelines.

Author Response

Comment 1: Please describe the source of data used in Figure 1.1.

Response: We thank the reviewer for this suggestion. We have now clearly indicated that the data for Figure 1.1 were obtained from Wind Information Co., Ltd. (WIND Database) both in the text (Page 2) and in the figure caption. We have added a justification for the study period (2011–2023) in Section 4.1, as this timeframe aligns with the implementation of China’s 12th Five-Year Plan (2011–2015)—which explicitly emphasized green development and sustainability, thereby providing a coherent policy context for ESG practices—while also capturing the full evolution of ESG disclosure practices in China, from early adoption to relative maturity; additionally, 2023 represents the most recent year for which comprehensive data were available at the time of analysis, ensuring the relevance and timeliness of the findings.

Comment 2: Inconsistency in variable terminology between "Environmental Information Disclosure Quality" and "information disclosure quality".

Response: We sincerely thank the reviewer for this crucial observation. We have revised the manuscript to consistently use the conceptual term "information disclosure quality (IDQ)" throughout the paper. In Section 4.2, we have added a justification explaining our use of environmental disclosure as an empirical proxy for the broader construct based on theoretical relevance, measurement feasibility, and academic precedent.

Comment 3: Unclear note in Model (4.5).

Response: We have removed the internal editorial note that was inadvertently left in the manuscript. The model specification itself remains correct and unchanged.

Comment 4: Omission of "Industry FE" in Table 5.4.

Response: We have corrected Table 5.4 by adding the missing row "Industry FE" and setting it to "Yes" for both columns.

Comment 5: Clarification needed for "Ind4 FE" in Tables 5.5 and 5.6.

Response: We have revised all tables to use the clearer term "Ind 4 FE" and added an explanation in Section 4.3 that industry fixed effects are controlled at the 4-digit level. “Ind4 FE” refers to Industry Fixed Effects based on the 4-digit industry classification code, which provides a more granular control for industry-specific characteristics compared to broader (e.g., 1-digit or 2-digit) classifications. To prevent any confusion and ensure consistency with the term used in the model specification section (“Ind 4 FE”), we have revised all tables (including Tables 5.5 and 5.6) to use the clearer term “Ind4 FE”. We have also added a brief explanation in Section 4.3 to clarify that the industry fixed effects are controlled at the 4-digit level. Thank you for prompting us to improve the clarity of our presentation.

Comment 6: Apparent contradiction in ROA measurement description.

Response: We have clarified that we employed an alternative calculation method for ROA (rather than selecting an alternative proxy) in the robustness test section to examine the sensitivity of our results to different accounting formulations.

Comment 7: Incorrect significance marking in Table 5.9.

Response: We have corrected Table 5.9 by removing the significance stars from the statistically insignificant coefficient for Cash in column L.TC(3).

Comment 8: Reference formatting inconsistent with journal guidelines.

Response: We thank the reviewer for pointing out this important issue. We have now reformatted the entire reference list to ensure full consistency with the journal’s guidelines, including alphabetical ordering by the first author’s surname, uniform punctuation, and correct use of italics. We appreciate the reviewer’s attention to detail, which has helped us improve the manuscript’s adherence to the journal’s standards.

Reviewer 3 Report

Comments and Suggestions for Authors

Dear  author,
The manuscript addresses a highly relevant and timely topic at the intersection of ESG performance, trade credit financing, and corporate financial outcomes in China’s manufacturing sector. It presents a rich dataset (2011–2023) and employs robust econometric models, providing empirical evidence of mediation and moderation effects. The paper is potentially valuable for both academia and practice. However, several critical issues should be addressed before the manuscript can be considered for publication.

1. Originality and Contribution

The theoretical contribution is not sufficiently differentiated from existing studies; the use of stakeholder theory, signaling theory, and sustainable development theory remains relatively conventional. The interpretation of the negative moderation effect is speculative and would benefit from more rigorous empirical support (e.g., nonlinear models, threshold effects).

Recommendation: Strengthen the theoretical positioning by clearly stating how this study extends or challenges prior frameworks.

2. Methodology

ESG measurement relies on a simplified numerical transformation of Hua Zheng ratings, which may not fully capture multidimensional ESG performance. The construction of the disclosure quality index (EID) is interesting, but its validation and reliability are not discussed. Inter-coder reliability or methodological transparency is needed. Endogeneity concerns remain: although lagged variables are used, potential reverse causality and omitted variable bias are not fully addressed. Advanced techniques such as instrumental variables (IV), system GMM, or 2SLS could strengthen causal claims.

As improvement: Provide more methodological justification for the measurement of ESG and EID, and consider addressing endogeneity with more advanced econometric tools.

3. Clarity and Structure

Literature review is overly descriptive, with many references listed but limited synthesis and critique. Some redundancy across introduction, literature, and theory sections. Certain variable definitions contain inconsistencies (e.g., Lev described differently in various places). Several tables are overloaded with detail and could be summarized more clearly for readability.

Recommendation: Streamline the literature review by synthesizing key debates and highlighting research gaps. Revise tables for conciseness and consistency.

4. Results and Discussion

The interpretation of the negative moderation effect lacks depth; the “information overload” explanation is plausible but requires stronger theoretical grounding and additional robustness checks. The discussion remains highly context-specific (China), limiting international relevance.

You can improve.  Enrich the discussion with comparative insights from other emerging and developed economies, and consider alternative interpretations of the results. Here you may also use studies already published in the journal Sustainability

Final Recommendation

The manuscript has strong potential but requires significant improvements in theoretical framing, methodological rigor (particularly with respect to endogeneity and measurement), and clarity of presentation. Addressing these issues will substantially enhance its contribution to the ESG and corporate finance literature. 

Thank You

Author Response

Comment 1: Theoretical contribution needs better differentiation from existing studies and stronger theoretical positioning.

Response: We have substantially revised the theoretical contribution section to explicitly articulate how our study extends existing frameworks. Specifically, we: 1) expand stakeholder theory by incorporating supply chain financial relationships; 2) refine signaling theory by challenging its conventional linear assumption and proposing a nuanced, non-linear perspective; and 3) advance mechanism-based theoretical integration through our dual-path model. We have also acknowledged the potential for future research using nonlinear models to further investigate the negative moderation effect.

Comment 2: Methodological weaknesses in ESG measurement, IDQ validation, and endogeneity concerns.

Response:We have added a justification in Section 4.2 regarding ESG measurement, acknowledging that while the numerical transformation simplifies multidimensionality, it follows well-established practices in the literature (e.g., Wang & Yang, 2022; Wu & Zhu, 2024) and treats the Hua Zheng rating as a validated proxy for overall ESG performance. We have also included a new paragraph in Section 4.2 discussing the validation and reliability of the IDQ index, emphasizing the objective and rule-based nature of our content analysis scoring framework (Table 4.2) to ensure transparency and replicability, and have reported the inter-coder reliability statistic (Cohen’s kappa)/explained the use of a strict codebook with objective criteria for single-coder procedures to reinforce methodological robustness. Furthermore, we have strengthened the discussion of endogeneity in Section 4.3 by explicitly acknowledging the limitations of lagged variables and potential omitted variable bias, and have employed an instrumental variable (IV) approach, as suggested, to better address causality-a strategy corroborated by the robust results of IV estimation presented in Section 5.6.

Comment 3: Issues with clarity, structure, and presentation including descriptive literature review, redundancies, variable inconsistencies, and overloaded tables.

Response: We have: 1) Restructured the literature review around key theoretical debates and empirical gaps; 2) Streamlined content across sections to eliminate redundancies; 3) Ensured absolute consistency in variable definitions throughout the manuscript; and 4) Simplified several tables by standardizing language, removing less critical statistics, and improving presentation format.

Comment 4: Interpretation of negative moderation effect lacks depth and international relevance.

Response: We have substantially enriched our discussion by: 1) Exploring alternative theoretical mechanisms beyond "information overload," including proprietary cost theory and agency theory; and 2) Adding a comparative perspective discussing how our findings might generalize to other emerging and developed economies, drawing on studies published in Sustainability.

Comment 5: Final Recommendation: The manuscript has strong potential but requires significant improvements in theoretical framing, methodological rigor (particularly with respect to endogeneity and measurement), and clarity of presentation. Addressing these issues will substantially enhance its contribution to the ESG and corporate finance literature. 

Response: We have undertaken comprehensive revisions to address all concerns regarding theoretical framing, methodological rigor, and clarity of presentation. We believe these revisions have fundamentally enhanced the manuscript's contribution to the ESG and corporate finance literature.

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

 Overall Recommendation: Accept in present form.

Author Response

Comment: Overall Recommendation: Accept in present form.

Resposne to Comment:

We sincerely thank the reviewer for their positive evaluation and recommendation for acceptance, as well as for the valuable suggestion to further enhance the English language expression of our manuscript. In response, we have conducted a thorough review and refinement of the text, focusing on improving sentence structure and flow for greater clarity and conciseness, employing more precise and academic terminology, and ensuring consistency in style and terminology throughout. These revisions have further polished the paper, and we believe the manuscript is now stronger thanks to the reviewer's constructive input.

Reviewer 2 Report

Comments and Suggestions for Authors

The author has partially revised the paper based on previous review comments. However, a critical issue remains unresolved. In Comment 2 of my first-round review report, I raised the following concern: The moderating variable constructed in Table 4.2 on Page 9 of Section 4.2 is “Environmental Information Disclosure Quality.” However, in the title, abstract, and hypothesis development section, the variable used is “information disclosure quality.” Is “environmental information disclosure quality” equal to “information disclosure quality”? The logic behind the variable selection appears questionable.

 

In the first-round revised manuscript submitted by the author, I notice that the term “environmental information disclosure quality” in Section 4.2 was changed to “information disclosure quality.” However, the author did not modify the actual construction of the variable. The dimensions used in Table 4.2 remain entirely environment-focused. The author provided no reasonable explanation justifying why an environmentally oriented measure of information disclosure quality could represent the broader concept of “information disclosure quality.”

 

This is a serious issue. If the construction of a key variable lacks rationality or sufficient justification, the entire empirical findings of the paper become built on an unreliable foundation, thereby undermining their credibility.

Author Response

Comment: 

The author has partially revised the paper based on previous review comments. However, a critical issue remains unresolved. In Comment 2 of my first-round review report, I raised the following concern: The moderating variable constructed in Table 4.2 on Page 9 of Section 4.2 is “Environmental Information Disclosure Quality.” However, in the title, abstract, and hypothesis development section, the variable used is “information disclosure quality.” Is “environmental information disclosure quality” equal to “information disclosure quality”? The logic behind the variable selection appears questionable.

In the first-round revised manuscript submitted by the author, I notice that the term “environmental information disclosure quality” in Section 4.2 was changed to “information disclosure quality.” However, the author did not modify the actual construction of the variable. The dimensions used in Table 4.2 remain entirely environment-focused. The author provided no reasonable explanation justifying why an environmentally oriented measure of information disclosure quality could represent the broader concept of “information disclosure quality.”

This is a serious issue. If the construction of a key variable lacks rationality or sufficient justification, the entire empirical findings of the paper become built on an unreliable foundation, thereby undermining their credibility.

Response to Reviewer's Comment on Variable Measurement

We are deeply grateful to the reviewer for raising this critical and insightful comment regarding the consistency of our variable measurement. We fully agree that ensuring alignment between the theoretical construct, its operationalization, and its discussion is essential for the validity of the empirical analysis. We acknowledge that our initial use of the broad term "Information Disclosure Quality" alongside a measurement focused solely on environmental disclosure created a logical inconsistency, and we sincerely appreciate the reviewer's emphasis on the need for a more robust alignment.

In response, we have undertaken a substantive revision to fully address this concern. The title of the paper has been amended to explicitly reflect our focus, and throughout the manuscript—including the Abstract, Introduction, and Hypothesis Development sections—we have consistently replaced "Information Disclosure Quality (IDQ)" with "Environmental Information Disclosure Quality (EIQ)."This revision ensures perfect congruence between the concept we discuss, the variable we measure, and the inferences we draw, thereby enhancing the methodological rigor of our study and eliminating any potential for misinterpretation. We believe this change fully resolves the issue raised and thank the reviewer again for their valuable guidance, which has significantly improved the precision of our work.

Reviewer 3 Report

Comments and Suggestions for Authors

Dear author,
The improvements made to the manuscript are clearly noticeable and bring it to a level suitable for publication. I would like to commend you for the quality of your work, the effort invested, and the timeliness of your revisions.

I wish you continued success in your academic endeavors.

Author Response

Comment: The improvements made to the manuscript are clearly noticeable and bring it to a level suitable for publication. I would like to commend you for the quality of your work, the effort invested, and the timeliness of your revisions.

I wish you continued success in your academic endeavors.

Response to Comment 

We sincerely thank the reviewer for their positive and encouraging feedback on our revised manuscript. We are greatly honored by their recognition of the improvements made and are pleased to know that the manuscript is now considered suitable for publication.We also deeply appreciate their kind words regarding the quality of the work, the effort invested, and the timeliness of our revisions. Such support is truly motivating as we continue our academic research.

Round 3

Reviewer 2 Report

Comments and Suggestions for Authors

The author has revised the paper. I have no further comment.