Corporate Financialization, ESG Performance and Sustainability Development: Evidence from Chinese-Listed Companies

Abstract

With changing times as countries pursue sustainable development, traditional profit-driven strategic decisions are no longer sustainable. A well-planned financial investment may improve a business’s capital flow efficiency, but when short-term wealth overrides long-term value, the financialization of companies will inevitably impede their environmental, social, and governance (ESG) performance. This study examined how company financialization was related to its ESG performance by China Listed Companies between 2010 and 2019. According to empirical tests using data from the China Stock Market & Accounting Research database and the Wind Financial Terminal, corporate financialization negatively affects ESG performance. After a series of robustness tests, such as endogenous analysis, the conclusion still holds. Furthermore, financialization dampens ESG performance more in the private sector and in companies with high technology dependence. Mechanistic analysis shows that corporate financialization not only creates long-term value risks through crowding out real capital and appropriation of green resources but also undermines company ESG performance through a lack of balanced development to achieve objectives and capabilities. Lastly, using the green patent data provided by the Chinese Research Data Services Platform database, it is found that improved green technology innovation can mitigate the damage of corporate financialization on ESG performance, and this mitigation is more pronounced in regions with better green development. This study adds to the empirical evidence on the theoretical and controversial role of corporate financialization. It helps to warn of its short-sighted effects on sustainable development and provides implications through the positive effects of green technology innovations.

1. Introduction

The continuous occurrence of negative external shocks makes the ability to deal with crises a basic condition for the development and even survival of an enterprise. As a vital factor in measuring the sustainable development ability of enterprises, ESG has received significant attention from investors around the world. Presently, the promotion of ESG-related policies in China has also increased significantly, notably since the introduction of the double carbon target, which led to a significant increase in investment related to this topic [1]. Nonetheless, in general, ESG development in China is still late, and a few enterprises are still lagging behind in their awareness of sustainable development.

More importantly, Chinese enterprises are generally under increasing pressure to perform. At the same time, the return on investment in social responsibility is uncertain. As a result, it is difficult to comfortably balance immediate gains with sustainable development, even with the phenomenon of non-financial companies penetrating into the financial sector through various direct or indirect means driven by high profits (Corporate financialization derives from the connotation of financialization. In a broad sense, corporate financialization is a process in which financial assets replace entity input. This kind of behavior usually carries two connotations. One is that enterprises will engage in more financial investment and even rely on the financial market; the other is that financialization aims to increase the source of profit. Taking into account the background and purpose of the change in enterprise investment structure in China in recent years, this paper defines corporate financialization as the investment behavior of non-financial companies changing their capital structure by increasing financial assets and pursuing financial capital profits).

Considering actual development, in the last decade after the 2008 financial crisis, the ratio of financial assets held by Chinese-listed companies to total assets has increased significantly. The average size of financial assets held by non-financial listed corporations has climbed even more sharply. More and more companies, including some well-known real estate companies, are beginning to favor the financial and real estate investment fields. Market players show an obvious trend named “out of reality and into the void“. Moderate financialization can be a vital way to balance the coordinated development of the real economy and the virtual economy and promote the overall performance of enterprises. However, excessive financialization can cause a longer recession [2], slow aggregate demand growth [3], mislead highly qualified people [4], diminish their willingness to innovate [5], and reduce the industrial investment rate [6]. It can also lead to a series of negative effects, such as the main business being squeezed [7] and the expansion of shadow banking [8], even causing serious harm to the economic and social ecosystem.

From the research status, the impact of corporate financialization on traditional performance has been well documented. On the one hand, moderate financialization motivated by reserves can contribute to the overall performance of the company through the surplus effect (investing excess funds in the financial sector to maintain monopoly profits) [9]. On the other hand, excessive financial investment driven by the arbitrage motive can cause a decline in the rate of industrial investment through the substitution effect (investing limited capital in the financial sector to improve performance) [10,11]. While these studies are undoubtedly significant for our understanding of the impact of corporate financialization, most of the current discussions are still limited to a single financial dimension, and there are limitations to the study of company sustainability issues. Given the requirements for sustainable development of enterprises under future economic and social trends, further research on how the financialization of companies affects sustainability performance can fill the gap in the related field.

In addition, there are other reasons that cannot be ignored that link corporate financialization to ESG performance. When companies are able to successfully balance profit maximization and social responsibility goals, the reserve requirement under capital-rich conditions may enhance ESG performance by maximizing the efficiency of the use of funds [12]. However, in reality, as an emerging market country, the Chinese market is relatively late in paying attention to the ESG concept. If there are still a large number of financial-related investments in which companies sacrifice long-term sustainable development for immediate benefits, then corporate financialization will become a vital factor inhibiting the practice of ESG concepts. Since it is difficult to directly derive the exact conclusion of the impact of corporate financialization on ESG performance from existing research results and theories, drawing on empirical evidence from Chinese non-financial listed companies, the study can complement the relevant theory by providing the impact of corporate financialization on ESG. In fact, Chinese companies’ lagging understanding of ESG concepts has caused them to suffer from social responsibility crises and environmental and consumer protection hazards in their international investment practices. This undoubtedly adds a non-financial dimension to the challenges that Chinese companies face in international market transactions. Therefore, studying the transmission mechanism between corporate financialization and ESG and further finding ways to promote ESG will help Chinese companies to enhance the relevance of their ability to deal with such challenges.

Unfortunately, previous studies on the relationship between corporate financialization and ESG and its transmission mechanism are few. In addition, there are still some controversies about relevant studies in the existing literature [13,14]. In addition, there is a lack of research on the regulatory effect between the two. In fact, green technology innovation, which combines ecological orientation with economic orientation and social orientation, may play a vital role between the two. The speculation is primarily based on the fact that green technology innovation achieves green output by increasing the industry’s overall efficiency [15]. While some scholars have argued that green technology innovation promotes sustainable development or long-term value creation for enterprises [16,17,18,19], few scholars have examined green technology innovation as a moderating variable of corporate financialization and environmental, social, and governance performance in the existing literature.

Combined with the above background and existing literature research, this paper attempts to explore whether corporate financialization behavior will affect the sustainable development of enterprises. This is also the main research motivation for this paper. Accordingly, this study is designed to investigate whether this influence is heterogeneous, what channels influence the relationship between the two, and whether factors closely related to ESG performance will have a moderating effect on the relationship. In order to achieve the research objectives, this paper takes China’s A-share non-financial listed companies from 2010 to 2019 as the research object and analyzes and discusses the above issues through empirical testing.

The study may make a marginal contribution in several ways. Firstly, based on the empirical evidence of listed companies in China, the results of the impact of corporate financialization on ESG performance can provide supplementary evidence for the controversial results at the theoretical and practical levels. Secondly, the heterogeneous results caused by different motivations found in the context of Chinese characteristics are conducive to a more comprehensive understanding of the relationship between corporate financialization and ESG performance. Thirdly, from the three channels of green development, resource appropriation and short-term wealth effect, we reveal the mechanism of corporate financialization on ESG performance, which not only broadens the profound connotation of sustainable development but also helps to clarify the factors that promote or inhibit ESG performance from a theoretical perspective. The verification of the moderating effect of green development on the relationship between them provides a direct reference for practical policy guidance. Finally, in the test of the resource appropriation channel, we do not adopt the common analysis of absolute motivation indicators but innovatively construct a relative indicator of arbitrage preference based on a more profound underlying mechanism (arbitrage preference differences) to start the study, which further enriches the theory related to corporate financialization while improving the rationality of the indicator. Overall, this paper not only expands on the unfavorable factors that inhibit companies’ ESG performance from the perspective of corporate financialization using microdata, but also enriches the understanding of the relationship between the two through heterogeneity analysis. Additionally, as well as revealing theoretically the inner logic of corporate financialization inhibiting environmental, social, and governance performance by multidimensional mechanism analysis, the warnings and experience references provided to enterprises on the basis of this also contribute to practical enlightenment.

The following contents are arranged: The second part is Hypothesis Development and Research Design, the third part is Methodology, the fourth part is Empirical Results, the fifth part is Influence Mechanism Test, the sixth part is Further Analysis of the regulation effect, and the seventh part is Discussion and Implications.

2. Literature Review and Hypotheses Development

2.1. Corporate Financialization and ESG Performance

Theoretically, there may be differences in the impact of corporate financialization on ESG performance, mainly because different financial investment motives will result in differentiation [20].

On the one hand, corporate financialization behavior may have a positive impact on corporate ESG performance and enhance the ability of enterprises to improve sustainable development. The logical starting point for this phenomenon is the reserve effect theory. According to the precautionary savings theory, financial assets are more liquid than fixed assets [21]. Therefore, when enterprises face financial problems, financial assets can be quickly sold to obtain working capital, relieve the financial pressure on enterprises and play a reserve role. This reserve effect is more obvious when there is increased economic uncertainty or potential investment opportunities. Although the principal–agent theory points out that shareholders tend to pursue value added at the capital level, while senior managers pay more attention to their own compensation, conflicts between the two will inevitably lead to agency costs. However, when corporate governance is effective, the agency cost problem can be reduced to some degree, and the interests of shareholders and managers become more similar. This will greatly reduce the possibility of excessive profit-seeking under individualism in order to achieve risk smoothing through the capital reserve effect. From a risk smoothing motivation perspective, firstly, due to the objective reality of higher and higher costs, as opposed to the characteristics of rapid returns in the financial sector. These characteristics result in lower and lower returns and longer investment cycles in the real world. Accordingly, rational investors will likely invest their funds in areas with higher marginal returns. In addition, based on order financing theory, when an enterprise reaches a certain scale, a certain proportion of financial assets can also be used as a necessary financial buffer to deal with financial risks or difficulties at any time in the future [22], thus reducing the difficulty of obtaining a new round of credit support from financial institutions and enhancing the ability to withstand risk losses in the investment process [23]. Therefore, it can be inferred that there may be two reasons why corporate financialization promotes the balanced development of enterprises.

Firstly, it can broaden the existing profit channels and leverage profit advantage. The company’s existing physical business has low profit returns, and certain financial investment practices can assist in obtaining additional profit input. Moreover, since the finance sector is likely to obtain a higher return on investment, enterprises will have more capital available to invest in innovation research and environmental protection, social responsibility and other aspects. In general, the emphasis on innovation research, environmental protection, and social responsibility will continue to enhance the reputation and value of enterprises while driving their growth. At the same time, the reality of long return cycles and uncertain expected returns is also a case to be considered. The performance improvement function brought about by the substantial profit of financial investment may enhance the ability and willingness of enterprises to make long-term development blueprints, thus improving their ESG performance.

Secondly, it can improve future capital reserves and generate cost optimization advantages. In order to cope with future economic uncertainties, enterprises often increase the size of their fund reserves through financial investment. This will help enterprises to put idle funds to work, increase the liquidity of enterprise assets, and thus realize the preservation and appreciation of assets. In this process, enterprises spontaneously form an internal capital reservoir. This will broaden the financing options, improve the efficiency and flexibility of the use of funds, and reduce the overall cost of financing. In general, environmental protection and social services require continuous investment. However, sufficient reserves of internal funds and cost advantages provide enterprises with additional options to increase such investments. Therefore, financialization may help enterprises increase multidimensional capital investment to achieve balanced development and then improve ESG performance.

On the other hand, corporate financialization may also have negative effects and inhibit ESG performance. The analysis at this level mainly relies on the theory of investment substitution. The theory of investment substitution is another theory about the motivation for corporate financialization. According to this theory, economic profit maximization is the primary objective. Therefore, driven by profit, when the return on entity investment of an enterprise is higher than that on financial investment, the enterprise will reduce or not engage in financial investment. However, if the overall return on investment in the financial field is higher than that on entity investment, firms will replace physical investment with financial investment [24]. Considering arbitrage motivation, both input and transaction costs in the financial field are lower, and the expectation of faster realizations is higher. This is attractive enough for enterprises that cannot cope with the long and slow return cycle of industrial investment [25]. In addition, although corporate financialization is often regarded as the short-sighted behavior of investors, driven by the concept of short-term return first [26,27], the interests of principals and agents tend to converge, and professional managers are also willing to invest funds in the financial sector to cope with the current performance assessment pressure [28]. This driving force for immediate performance improvement allows enterprises to increase the degree of financialization while crowding out the original main business. It can be predicted that the reasons why corporate financialization inhibits ESG performance can be summarized in two aspects.

Firstly, short-sighted behavior by enterprises impacts the potential for sustainable development and reduces overall competitiveness. Neoclassical economics believes that profit maximization is the sole goal of business operations. However, with the increasing frequency of sudden social problems, the concept of coordinated development of the economy, society and environment has gradually become a consensus. It means that the enterprise is no longer satisfied with the single pursuit of financial profit. Otherwise, it will not be able to cope with the complex and changing business environment and operational challenges of pollution control. In addition, it will be difficult to establish social responsibility, which will affect the formation of reputation value. Therefore, with the increasingly strict requirements of sustainable development, enterprises limited to short-term performance pursuit will no longer have competitive advantages, and naturally, it is difficult to have better ESG performance.

Secondly, corporate financialization diverts them from their main business and makes it more difficult to strengthen investment in environmental and social responsibility. Specifically, corporate financialization may compensate for the absence of main business profits in the short run. However, non-financial enterprises lack the experience and capabilities to make financial investments, so it is difficult to generate a reservoir effect. On the contrary, in more cases, non-financial enterprises will inevitably crowd out other business expenses when they use their resources for financial investment. Rather, it interferes with the main business. At this time, as more funds withdraw from the main business and reduce fixed asset investment [29], the enterprise will be faced with core product replacement stagnation, production capacity decline and other problems, and even fall into a vicious cycle of limited main business development and profit decline, making it more difficult to take into account the balanced development of the environment, society and other aspects. It will inhibit ESG performance.

In conclusion, financialization’s promotion or inhibition of ESG is reasonable, but the actual effects are inconclusive. To this end, we construct the following competing hypotheses:

Hypothesis 1 (H1a). 

Corporate financialization has contributed to the ESG performance of Chinese-listed companies.

Hypothesis 1 (H1b). 

Corporate financialization has hindered the ESG performance of Chinese-listed companies.

2.2. Heterogeneity Analysis of the Impact of Corporate Financialization on ESG Performance

Since there are different motives and effects of corporate financialization, it is likely to lead to different degrees of influence between them. Firstly, the motivation of corporate financialization. From the perspective of equity nature, enterprises with different natures have different motivations for financialization, which will have a differential impact on ESG performance. Specifically, because of the special nature of shareholders, state-owned enterprises often have the dual attributes of general market participation and special service to the government. The managers of state-owned enterprises are more inclined to make use of company resources to achieve social and political goals in business decision-making [30] or pay more attention to personal wealth accumulation and political promotion [31,32] rather than the performance improvement of the enterprise itself. On the contrary, the sensitivity of private enterprises to performance changes is much higher than that of state-controlled enterprises. The demand for capital reserves is often placed behind the demand for arbitrage, and the demand for development is often placed behind the demand for survival. In addition, state-owned enterprises have multiple goals that are not limited to profit pursuit, and the short-term arbitrage motive due to the nature of profit pursuit is weaker than private enterprises. The diversification of objectives determines the complexity of the financialization of state-controlled enterprises. In light of this, it can be concluded that the financialization of state-owned enterprises will have a lesser impact on their environmental, social and governance performance than its impact on private enterprises.

Based on the above analysis, hypothesis H2 is proposed as follows:

Hypothesis 2 (H2). 

The influence of corporate financialization on ESG performance varies with the nature of ownership.

Secondly, there is the effect of corporate financialization. From the perspective of technology dependence, the differences among enterprises lead to different levels of response to financialization behavior, thus bringing different impacts on ESG performance. Generally, high-tech-dependent enterprises have higher requirements for sustainable development. The greater the reliance on technology, the greater the reliance on innovation. Such companies have to pay more for research and development, deploy more researchers and often buy more machinery, buildings and other fixed assets during production. These inelastic demands determine the degree of dependence of enterprises on resources, which determines that such enterprises will be more sensitive to resource changes. Currently, once financialization has a crowding-out effect on rigid demand resources, research and development will be hindered, and patent output will decline. This will affect development and result in the stagnation of daily operations. Naturally, it is impossible to increase investment in environmental protection and social security. Alternatively, if the main business products are not highly dependent on technology, regardless of whether financialization has a positive reserve effect or a negative crowding-out effect, business development will not be influenced by rigid demand. Therefore, the degree of financialization of low-technology-dependent firms is less responsive to ESG performance than that of high-technology-dependent firms on the whole.

Based on the above analysis, hypothesis H3 is proposed as follows:

Hypothesis 3 (H3). 

The influence of corporate financialization on ESG performance varies with the degree of technology dependence.

2.3. Mechanism Analysis

Considering that ESG performance serves as a measure of the comprehensive development ability of enterprises, we believe that there is a short-term wealth effect, a green resource appropriation effect, and an equilibrium goal effect between corporate financialization and ESG performance, which are closely related to long-term sustainable development. The influence of corporate financialization on ESG performance will be realized through these three channels, respectively.

In the pursuit of short-term profits, corporate financialization crowds out physical capital input, thereby affecting ESG performance in the short term. Even though corporations’ financialization is generally regarded as speculative and short-sighted behavior, it is also inconsistent with the requirements of the ESG concept for sustainable development. Practically, many non-financial enterprises pursue financial investment behavior, which leads to the crowding out of industrial capital, such as innovation input [33]. Why is that? The first reason is that according to the principal–agent principle, managers have the power to make decisions but not ownership of the decisions. Therefore, in practice, managers are more inclined to use their decision-making power to pursue individual interests. A sample of data shows that the average years of service for managers in listed companies in China are no more than 6 years. As a result, most managers choose to increase capital investments to help enterprises improve immediate performance, and so they realize an increase in personal compensation. Managers’ personal income targets eventually crowd out physical capital inputs with longer payback periods. The second reason is that with the intensification of competition and macroeconomic fluctuations, entity profits are gradually diluted, and the ultra-high return on investment in the financial field has become a way for some firms to reverse the decline in profits and even revert to operating difficulties. This process encourages the growth of the overall size of the financial industry, which in turn drives more enterprises to become involved in the financial industry. The focus on short-term wealth and the neglect of long-term value improvement cause enterprises to actively reduce investment in construction projects and the transformation of entity projects. In fact, empirical evidence testing based on China’s listed companies has basically confirmed the crowding out effect of corporate financialization on physical capital [34]. Gradually deviating from the main business will eventually hurt the company’s long-term growth. That is to say, the process of corporate financialization indirectly affects ESG performance by crowding out physical capital.

Based on the above analysis, hypothesis H4 is proposed as follows:

Hypothesis 4 (H4). 

Corporate financialization influences corporate ESG performance through the short-term wealth effect.

From the perspective of the green resource appropriation effect, corporate financialization changes the allocation of resources for green development in the process of capital asset accumulation. This results in a change in environmental sustainability performance. One of the origins of ESG is the prominence of environment-related issues. At present, the disclosure of ESG reports by listed companies in China is still in the voluntary stage. However, listed companies and their subsidiaries at all levels must disclose environmental information if they belong to key environmental monitoring units. Thus, environmental assessment is the focus of ESG audits of listed companies in China. Even though the current policy guidance is very clear, there is still resistance to the promotion process. First, the concept started relatively late in China, and there is a certain lag in awareness among enterprises. Secondly, green development and construction require a huge amount of initial investment, and the corresponding returns are uncertain on the one hand [35]. On the other hand, the relative return period is generally lengthy and difficult to measure. While significant in terms of long-term value, this feedback is often latent. As a result, companies tend to ignore this potential long-term value and focus on current profit growth. Moreover, China’s finance industry has been prosperous for more than ten years, and financial investment activities have a high penetration rate, although green development activities are lagging behind. Therefore, from the perspective of transmission order, financial investment activities carried out in advance are likely to occupy relevant resources before enterprises have the concept of green development. Of course, if corporate financialization can play a reservoir effect, it can enhance corporate value by assisting the construction of corporate green development. However, from the perspective of policy orientation, finance institutions are generally more willing to invest funds in enterprises with green development goals or green development projects. As a result, in practice, enterprises rarely need to increase liquidity through financial behavior in order to supplement green resources. Generally, ESG performance is suppressed by corporate financialization, which squeezes out green resources.

Based on the above analysis, hypothesis H5 is proposed as follows:

Hypothesis 5 (H5). 

Corporate financialization influences corporate ESG performance through the green resource appropriation effect.

When an enterprise has the aim of actively balancing short-term profits and long-term value, corporate financialization may serve as a reserve function. Otherwise, it will fall into a long-term development dilemma that limits its balanced development ability. Effective ESG performance fundamentally depends on the balance between corporate profit and responsibility and the balance between the short and long term. The achievement of this result, first of all, produces clear requirements for the business objectives of enterprises. It also creates higher requirements for the capability of enterprises to exercise governance. Balancing financial performance and potential value is the result of rational choices made by enterprises in the face of two-way selection and moral hazard. Because of the differences in size, management ability, degree of financing constraint, and other aspects, the existence of an equilibrium goal and the realization ability of an equilibrium goal must also differ. In theory, companies with better growth prospects tend to have more opportunities to participate in international activities and social welfare. When a company violates the principle of ESG development, a short-term wave of public opinion will become reflected in the company’s goodwill. As a result, the benefits of international competition and the endogenous system of social responsibility are more likely to become the fundamental driving forces of enterprises to develop a concept of balanced development. The long-term value enhancement brought by enterprises aiming to achieve a well-balanced goal will be integrated into the ability to achieve balanced development. Its financial investment behavior is likely to be no longer pure speculative behavior. On the contrary, if the growth rate of the enterprise is poor, or even when the enterprise is struggling, it is naturally difficult to raise the goal to the level of balanced development and even more difficult to improve the ability of balanced development. At this point, the financialization process will show a more obvious arbitrage motive and then produce the crowding-out effect of long-term value investment. In short, firm financialization affects its ESG performance by weighing goals.

Based on the above analysis, hypothesis H6 is proposed as follows:

Hypothesis 6 (H6). 

Corporate financialization influences corporate ESG performance through the equilibrium target effect.

3. Methodology

3.1. Sample and Data Acquisition

In this article, the annual data taken from Chinese-listed companies from 2010 to 2019 are analyzed. The extracted data contained all of the independent variables, control variables, and the firm ownership variable from the China Stock Market & Accounting Research (CSMAR) database, the ESG rating data comes from the Wind Financial Terminal, while the moderating variables are extracted from the CPRD sub-database of Chinese Research Data Services Platform (CNRDS). Samples are selected up to 2019 because the epidemic may interfere with overall results [36,37]. During our data collection, samples whose operating status is ST or *ST and samples with data missing are excluded. All of the core variables were winsorized at a 1% level to avoid the influence of outliers.

3.2. Variable Selection and Description

3.2.1. Dependent Variable

Drawing on the methodologies of Chang et al. [38] and Li et al. [39], this paper uses data from the SNSI ESG rating system as the dependent variable in the benchmark model. The SNSI ESG published by Sino-Securities Index Information Service (Shanghai, China) Co., Ltd. is divided into 9 levels from C to AAA and is rated quarterly. Based on the ESG evaluation system, the ESG performance of companies is assigned a score of 1–9 from low to high, with higher values indicating better ESG performance. At present, this indicator has been recognized and widely used by the academic community [40]. Additionally, we also consider the ESG evaluation indicators provided by Bloomberg as a robustness test.

3.2.2. Independent Variable

Corporate financialization refers to a firm’s earnings mainly coming from financial channels rather than capital accumulation channels in the traditional sense, such as production or trade [41], or non-financial firms allocating capital to financial assets with a high degree of virtualization [42]. The main performance is to change the investment structure by increasing financial assets and pursuing capital appreciation instead of operating profits. Therefore, the most direct measure of the degree of corporate financialization is financial assets as a percentage of total assets.

However, which assets are considered financial assets? In this regard, earlier scholars believed that monetary funds should also be included in financial assets, but operating activities themselves also generate currency, and the speculative properties of real estate investment have become more obvious in recent years [43]. Integrating related definitions, this study measures financial assets as the sum of trading financial assets, derivative financial assets, net loans and advances, net available-for-sale financial assets, net held-to-maturity investments, and net investment properties, and the proportion of financial assets to total assets represents the degree of financialization of enterprises. To ensure the robustness of the model, this paper further uses a dummy variable to indicate the degree of financialization of enterprises. This variable is set to 1 when the level of financialization of enterprises in the current year is higher than the median of the corresponding year. This represents a high degree of corporate financialization; otherwise, it is 0.

3.2.3. Moderating Variable

The theoretical part points out that green technology innovation can moderate the degree of inhibition of ESG performance by company financialization. Drawing on previous experience, this study uses green patents as a measure of green technology innovation. The specific reasons are outlined in the following. Firstly, existing studies generally consider that corporate green technology innovation includes both green innovation inputs and green innovation outputs. Green innovation R&D investment can reflect the level of green technology innovation of enterprises [44], but green innovation inputs are difficult to be separated from corporate R&D inputs, and there may be limitations to using only traditional R&D funding or the number of R&D personnel as a measurement indicator; therefore, it is more feasible to use the relevant indicators of green innovation outputs as the proxy variable of green innovation. Moreover, since patented technology can better reflect the potential market benefits and economic value of green innovation for enterprises [45], the technological knowledge-based products represented by patents are the main achievements of the enterprise’s innovation output stage. Similarly, green patents are naturally a measure of key elements of green innovation output.

Specifically, the number of green patents applied by and the number of green patents successfully obtained by enterprises are used in the paper to jointly refer to green patents. Among them, the number of patent applications for green utility models and the number of patent applications for green inventions of listed companies is the proxy variables for green patent applications, and the number of patents obtained for green utility models and the number of patents obtained for green inventions of listed companies is the proxy variables for green patent acquisition.

3.2.4. Control Variable

Based on the consideration of the reliability of the empirical results, this paper controls for some key factors that may have an impact on the explanatory variables with reference to the established literature. Such as general financial indicators leverage ratio. Companies with lower debt ratios are more likely to improve ESG levels [46]. There are also studies that show that the larger the company size model, the greater the possibility of improving ESG levels [47]. Existing studies usually use company assets, turnover or the number of employees to refer to company size [48,49,50]. Sales are more closely related to a company’s traditional financial performance. They may have less relationship to ESG indicators that measure the overall performance of the company. In addition, the larger the number of employees, the broader the overall economic benefits that can be created. However, at the same time, it will also result in higher energy consumption, so the overall impact on ESG is therefore unclear. To sum up, we use the logarithm of total assets as a proxy variable for firm size. Investment opportunities are also an influential factor affecting corporate ESG performance. The existing research usually uses the ratio of market capitalization to total assets for measurement [51]. A company’s growth can usually be measured by sales revenue growth or profit growth [52,53]. However, considering the need to further explore the issue of profit level in the follow-up mechanism analysis, we chose the same applicable sales growth rate as the control variable for growth. The sustainable development capability of the enterprise is also closely related to the business strategy of the enterprise. Since we believe the management of the enterprise directs the development strategy of the enterprise, we also include the tenure of the General Manager, executive compensation, and shareholding ratios of the major shareholders directly related to management. Furthermore, this article also clusters companies into public and private. The specific variables are defined and measured in

Table 1. Variable definitions.

Type	Factors	Variable Name	Symbol	Calculation Method
Dependent variable	Corporate ESG Performance	Environment, Social, Governance Ratings	ESG	According to the SNSI ESG quarterly rating, assign 1–9 points from low to high and take the median
Independent variable	Corporate Financialization	Degree of Financialization	FIN	(Trading Financial Assets + Derivative Financial Assets + Net Loans and Advances + Net Available-for-sale Financial Assets + Net Held-to-maturity Investments + Net Investment Properties)/ Total Assets
		Level of Financialization	FIND	Take the median of the degree of financialization according to the year, if the company’s financialization degree is higher than the annual median, it takes 1; otherwise, it takes 0
Moderating variable	Green Technology Innovation	Number of Green Patent Applications	UMA	Number of Patent Applications for Green and Practical Models
			INVA	Number of Patent Applications for Green Inventions
		Green Quantity Patent Acquisition	UMG	Number of Patents Obtained for Green Utility Models
			INVG	Number of Patents Obtained for Green Inventions
Control variable	Corporate Financial Indicators	Asset Liability Ratio	LEV	Total Liabilities/Total Assets
		Firm Size	SIZE	The Natural Log of Total Assets
		Investment Opportunities	TQ	Market Value/Total Assets
		Sales Revenue Growth Rate	SALEG	The company’s sales revenue growth rate in the current year compared with the previous year
		Length of Service	TENURE	General Manager Tenure
		Executive Compensation	PAY	The Natural Log of Executive Compensation
		Ownership Concentration	OWN	Shareholding Ratio of Major Shareholders
Other variables	Company Ownership	Ownership Category	OWNER	If the controlling shareholder is state-owned, it takes 1, otherwise it takes 0

Annotates: “+” means that the variables add up to each other.

.

3.3. Baseline Regression Model Design

In order to explore the impact of corporate financialization on ESG performance, a benchmark regression model with ESG rating as the dependent variable and corporate financialization as the independent variable is constructed based on the research hypothesis. Since the dependent variables are discrete variables obtained from the ratings, using conventional estimation methods will result in regression bias. Therefore, Poisson regression is applied to reduce the bias of the estimation results.

Assuming that the ESG scores obey a Poisson distribution and constructing the conditional expectation function Equation (1). The corresponding estimation model is detailed in Equation (2).

$$\mathrm{E}(\mathrm{ESG}|\mathrm{x})= \exp \left({\mathrm{x}}^{\prime }\mathsf{\beta }\right),$$

(1)

$$\mathrm{Ln}(\mathrm{E}({\mathrm{ESG}}_{\mathrm{it}}|\mathrm{x}))={ \mathsf{\beta }}_0+{\mathsf{\beta }}_1{\mathrm{FIN}}_{\mathrm{i},\mathrm{t}}+{\displaystyle \sum }{\mathsf{\beta }}_{\mathrm{i}}{\mathrm{X}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\mu }}_{\mathrm{i}}+{\mathsf{\phi }}_{\mathrm{t}}+{\mathsf{\epsilon }}_{\mathrm{i},\mathrm{t}}$$

(2)

In the above model, X represents all control variables, ${\mathsf{\mu }}_{\mathrm{i}}$ represents the industry effect, and ${\mathsf{\phi }}_{\mathrm{t}}$ represents the time effect. The core explanatory variable ${\mathrm{FIN}}_{\mathrm{i},\mathrm{t}}$ is the level of financialization of the firm. If the coefficient of ${\mathsf{\beta }}_1$ is negative, it means that there is a negative inhibitory effect of financialization of the firm on ESG performance. The coefficient obtained by adopting quasi-great likelihood estimation for the parameters of the equation is not a marginal effect, which represents the implication that ESG score will change by β percentage points when the explanatory variable changes by one unit.

4. Empirical Results

4.1. Descriptive Statistics

We selected China’s A-share listed companies from 2010 to 2019 as our research objectives. The descriptive statistics in

Table 2. Descriptive statistics.

Variable	Obs.	Mean	Std.	Min.	Med.	Max.
ESG	14,599	4.053	1.004	1.000	4.000	7.000
FIN	14,599	0.029	0.058	0.000	0.004	0.326
FIND	14,599	0.488	0.500	0.000	0.000	1.000
UMA	13,051	1.061	3.254	0.000	0.000	23.000
INVA	13,107	1.340	4.573	0.000	0.000	36.000
UMG	13,020	0.958	2.976	0.000	0.000	21.000
INVG	10,052	0.418	1.480	0.000	0.000	11.000
LEV	14,599	0.382	0.203	0.042	0.365	0.851
SIZE	14,599	21.830	1.116	19.826	21.692	25.255
TQ	14,599	2.118	1.280	0.907	1.697	8.311
SALEG	13,777	0.207	0.427	−0.506	0.131	2.783
TENURE	14,599	5.281	2.875	0.000	4.865	21.790
PAY	14,585	14.298	0.687	12.656	14.274	16.241
OWN	14,492	0.333	0.140	0.090	0.310	0.708

show that the median value of ESG is 4, indicating that the overall ESG rating of the sample is relatively balanced. In addition, the average value of FIN is much greater than the median value. This indicates that some companies with a high proportion of financial investment have raised the overall level of the sample. Further, the minimum and maximum number of patents obtained for green utility models (UMG) are 0.000 and 150.000, and the average value is 0.958. Thus, the number of available patents obtained by most enterprises is at a relatively low level, similar to INVG, UMA and INVA. Afterward, there are cases where the sales growth rate is negative in the sample at the financial level. Lastly, the TENURE indicator shows that the general managers of Chinese-listed companies change frequently, and the average term of office is only about five years.

4.2. Analysis of Baseline Model Estimation Results

First of all, we estimated the impact of financialization on the ESG Rating Performance of non-financial firms;

Table 3. Estimated results of the impact of corporate financialization on ESG performance.

Var.	ESG
FIN	−0.125 ***		−0.497 ***
	(0.04)		(0.15)
FIND		−0.008 **		−0.033 *
		(0.00)		(0.02)
LEV	−0.308 ***	−0.305 ***	−1.222 ***	−1.210 ***
	(0.01)	(0.01)	(0.05)	(0.05)
SIZE	0.052 ***	0.052 ***	0.209 ***	0.210 ***
	(0.00)	(0.00)	(0.01)	0.210 ***
TQ	−0.012 **	−0.012 ***	−0.043 ***	−0.043 ***
	(0.00)	(0.00)	(0.01)	(0.01)
SALEG	−0.010 *	−0.010 *	−0.043 **	−0.041 **
	(0.01)	(0.01)	(0.02)	(0.02)
TENURE	0.002 ***	0.002 ***	0.010 ***	0.010 ***
	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.028 ***	0.029 ***	0.116 ***	0.116 ***
	(0.00)	(0.00)	(0.01)	(0.01)
OWN	0.035 **	0.034 **	0.133 **	0.129 **
	(0.01)	(0.01)	(0.06)	(0.06)
Con.	−0.086	−0.093	−1.952 ***	−1.977 ***
	(0.06)	(0.06)	(0.25)	(0.25)
Obs.	13,572	13,572	13,572	13,572
Pseudo R2	0.0100	0.0100
Adj. R2			0.137	0.136
Wald chi2	2336.40	2325.16
F			68.00	67.67

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

presents regressions predicting the ESG response to financialized behavior in the 2010–2019 period. The dependent variable for all regressions in Table 3 is the median ESG rating. For all models in the paper, including Table 3, we contain dummy variables for each year and industry, where industry dummy variables are defined by the China Securities Regulatory Commission’s 2-digit SIC code.

Given that the dependent variable is discrete, we first used the Poisson regression described earlier; Columns 1 and 2 report the corresponding results. Where the indicator is a continuous variable of corporate financialization, the coefficient of the ESG variable is significantly negative, indicating that the financial investment behavior of non-financial firms has a negative effect on ESG performance. The estimated coefficient of ESG rating in Column 1 is −0.125, implying that for every 0.01 unit increase in the degree of financialization of a firm, the ESG rating of the firm will decrease by 0.125%. Financialization is associated with worse ESG performance and weaker ESG investment willingness to contain as a firm becomes more financialized. In Column 2, we use a dummy variable for corporate financialization, tending to consider the differential ESG performance of more financialized versus less financialized firms. Based on the results, the coefficient of the ESG variable remains significantly negative. This means that ESG performance is worse for firms with higher levels of financial investment compared to those with lower levels of financialization. Although Poisson regression is preferred, given the characteristics of the dependent variable, OLS regression is used for double-checking. The financialization indicator in Column 3 is a continuous variable, while Column 4 is a dummy variable. From the results, the regression coefficient of corporate financialization indicators on ESG performance is also significantly negative. Overall, the test results are more supportive of hypothesis H1b, which states that there is a dampening effect of corporate financialization on ESG performance.

In addition, the control variables convey some interesting information, such as larger firms have better ESG performance, and higher debt ratios are detrimental to ESG performance. In addition, market capitalization, if too high, may also be detrimental to the true value of the firm. In that regard, it should be noted that, traditionally, high sales growth will help improve financial performance, but from the perspective of ESG performance coefficients, faster sales growth may be a sign of over-reliance or emphasis on financial profits. At this time, companies should avoid pursuing short-term profit growth at the expense of long-term value enhancement. However, from the perspective of various corporate governance indicators, the promotion effect of superior governance ability on ESG performance is obvious. At the level of tenure and equity concentration, more stable management is conducive to ESG enhancement, while the positive significance of compensation reflects the effective role of incentive mechanisms.

4.3. Robustness Test

4.3.1. Replacing Variables and Models

First, we changed the regression model and controlled for each year and industry, clustering by the province in the model. The results are presented in Column 1 and Column 2 of

Table 4. Changing Metrics and Models.

Var.	ESG		ESGPB
FIN	−0.496 **		−4.331 **
	(0.20)		(1.58)
FIND		−0.031 **		−0.591 **
		(0.01)		(0.19)
LEV	−0.735 ***	−0.782 ***	−0.968 ***	−0.875 ***
	(0.07)	(0.07)	(0.62)	(0.19)
SIZE	0.085 ***	0.225 ***	1.492 ***	1.518 ***
	(0.02)	(0.03)	(0.11)	(0.11)
TQ	−0.046 ***	−0.011	−0.121 ***	−0.109
	(0.01)	(0.01)	(0.09)	(0.09)
SALEG	−0.041 ***	−0.055 ***	−0.108 ***	−0.117 ***
	(0.01)	(0.01)	(0.25)	(0.25)
TENURE	0.025 ***	0.011	0.071 ***	0.072
	(0.01)	(0.01)	(0.03)	(0.03)
PAY	−0.040	0.011	0.081	0.875
	(0.02)	(0.03)	(0.16)	(0.16)
OWN	0.827 ***	0.457 **	−0.952 ***	−1.056 **
	(0.17)	(0.18)	(0.62)	(0.62)
Con.	2.753 ***	−0.805	−23.630 ***	−24.189
	(0.48)	(0.57)	(2.54)	(2.55)
Obs.	13,572	13,572	3354	3354
Adj. R2	0.030	0.054	0.172	0.053

Annotates: *** and ** represent significance at 1% and 5% levels, respectively. The Robust standard error in parentheses.

. With the fixed effect regressions, either using corporate financialization continuous type variable or dummy variable, the coefficient of corporate financialization on ESG performance remains negative, as well as with the benchmark regression results.

In this paper, Bloomberg ESG ratings are also chosen to replace the original dependent variable ESG ratings, shown in Column 3 and Column 4 of Table 4. Unlike SNSI ESG ratings, Bloomberg ESG data includes not only the overall ESG performance of the company but also reveals the performance of three sub-dimensions, that is, environmental, social and governance, respectively. Considering that the total effect will be strongly correlated with the three sub-dimensions, we try to use a seemingly uncorrelated regression model to improve the efficiency and robustness of the estimation. The model first chooses the LM statistic for the basic hypothesis test of SUR estimation. The existence of a contemporaneous correlation between the equation perturbation terms is tested, and then the SUR system is estimated for each set of equations. The third column in Table 4 presents the estimation results of the SUR regression model using a continuous corporate financialization indicator. This result also demonstrates the inhibitory nature of corporate financialization on ESG performance. However, the dummy variable for corporate financialization in the fourth column of Table 4 still has a negative coefficient on the ESG indicator. This illustrates the stability of the original findings.

4.3.2. Sample Subinterval Estimation

This section considers estimation bias that may arise from sample changes. First, we include the real estate investment indicator in the measure of corporate financialization. We speculate that the inclusion of the real estate sector in the sample may cause bias. The Poisson regression model is re-estimated after excluding the real estate sector, and the results in Columns 1 and 2 in

Table 5. Sub-sample regression results.

Var.	ESG
FIN	−0.121 ***		−0.119 ***
	(0.04)		(0.04)
FIND		−0.008 *		−0.008 *
		(0.00)		(0.00)
LEV	−0.306 ***	−0.303 ***	−0.314 ***	−0.311 ***
	(0.01)	(0.01)	(0.01)	(0.01)
SIZE	0.050 ***	0.050 ***	0.050 ***	0.050 ***
	(0.00)	(0.00)	(0.00)	(0.00)
TQ	−0.012 ***	−0.012 ***	−0.013 ***	−0.012 ***
	(0.00)	(0.00)	(0.00)	(0.00)
SALEG	−0.012 **	−0.012 **	−0.011 *	−0.010 *
	(0.01)	(0.01)	(0.01)	(0.01)
TENURE	0.003 ***	0.003 ***	0.002 ***	0.002 ***
	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.029 ***	0.030 ***	0.029 ***	0.029 ***
	(0.00)	(0.00)	(0.00)	(0.00)
OWN	0.039 **	0.038 **	0.038 **	0.037 **
	(0.02)	(0.02)	(0.02)	(0.02)
Con.	−0.063	−0.069	−0.041	−0.046
	(0.06)	(0.06)	(0.06)	(0.06)
Obs.	13,114	13,114	12,875	12,875
Pseudo R2	0.0089	0.0088	0.0098	0.0098
Wald chi2	1817.09	1805.94	2094.13	2084.93

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

show that the coefficient of corporate financialization on the SNSI ESG rating indicator is still significantly negative, indicating that the original hypothesis still holds and the results obtained in the previous section are reliable. Moreover, the 2008 financial crisis had a persistent impact on the overall operations, investments and development of Chinese firms. Thus, the years in the post-financial crisis period are excluded, and only the data after 2012 are retained in order to eliminate macro-environmental disturbances. The results obtained in both Columns 3 and 4 of Table 5 show that controlling for the special sample does not materially affect the benchmark results.

4.3.3. Endogeneity Analysis

In considering the impact of corporate financialization on ESG, we have to deal with the endogeneity issue. On the one hand, as far as the topic itself is concerned, although both the theoretical analysis part and the empirical tests argue for the impact of financial investment behavior on company ESG performance, it cannot be ignored that corporate financialization is not only an influential factor in changing ESG performance but also that different levels of ESG may likewise drive firms to invest in financialization to different degrees [54]. Specifically, there is a reverse causality inverse spillover problem [55]. On the other hand, although we consider various types of control variables that scholars routinely use, there may still be other factors omitted or shocks that lead to estimation bias.

To alleviate the endogeneity problem arising from the above-mentioned reasons, we first deal with the endogeneity problem with the help of the instrumental variables approach. For the continuous variable of corporate financialization, we refer to the construction of industry-level instrumental variables customarily adopted in existing studies [56]. First, we select the first-order lag term of the median financialization level of listed firms in the same industry (excluding our firm) as an instrumental variable. Due to the competitive and synergistic nature, the level of the financial asset allocation of companies in the same industry will certainly influence each other. However, the level of financialization of other companies will not directly affect the ESG performance of our company. Therefore, theoretically, this construction method meets the basic conditions of instrumental variables and also passes the Wald endogeneity test in the operation. Columns 1 and 2 in

Table 6. Instrumental variable regression results.

Var.	FIN	ESG
FIN		−15.237 ***	−19.880 ***
		(1.73)	(2.68)
FIN_IV	0.001 ***
	(0.00)
FIND		−0.008 *		−0.008 *
		(0.00)		(0.00)
FIND_IV				−1.109 ***
				(0.02)
LEV	−0.020 ***	−1.442 ***	−1.630 ***	−1.121 ***
	(0.00)	(0.08)	(0.12)	(0.05)
SIZE	0.002 **	0.221 ***	0.248 ***	0.191 ***
	(0.00)	(0.02)	(0.02)	(0.01)
TQ	0.001 **	−0.039 ***	−0.031 ***	−0.041 ***
	(0.00)	(0.01)	(0.01)	(0.01)
SALEG	−0.006 ***	−0.128 ***	−0.136 ***	−0.038 *
	(0.00)	(0.03)	(0.04)	(0.02)
TENURE	0.000	0.012 ***	0.010 ***	0.011 ***
	(0.00)	(0.00)	(0.06)	(0.00)
PAY	0.004 ***	0.237 ***	0.267 ***	0.170 ***
	(0.00)	(0.03)	(0.03)	(0.01)
OWN	0.001	0.072	0.103	0.081
	(0.00)	(0.09)	(0.12)	(0.06)
Con.	−0.072 ***	−3.158 ***	−3.980 ***	−1.997 ***
	(0.01)	(0.37)	(0.48)	(0.23)
Obs.	11,419	11,419	11,419	13,661
F-first level	36.972
Wald chi2		585.22	388.68	1263.76
Hansen J(p)			0.1004
p-value				0.0332

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

report the regression results of the two-stage least squares (2SLS) first-stage and second-stage instrumental variables tests, respectively. The results show that the negative relationship between corporate financialization and ESG performance remains significant after using instrumental variables. To prevent heteroskedasticity interference, we further adopt the generalized moment estimation method. It is decided to include one to two lag terms for instrumental variables together in order to avoid the problem of weak instrumental variables and apt identification. Column 3 in Table 6 shows the results of the GMM regression of instrumental variables. The p-value of Hansen’s test is higher than 0.1, which means that the instrumental variables can pass the over-identification test. Based on the results, the original hypothesis still holds.

Regarding the issue of the effect of high and low financialization on firms’ ESG performance, in addition to considering the endogeneity problem due to reverse causality and omitted variables, we also need to deal carefully with the self-selection problem that exists in the model. In this regard, we use a treatment effects model to mitigate estimation bias due to the self-selection problem. Since the endogenous variable corporate financialization is a binary dummy variable here, it is likely that firms intensify or weaken their financialization behavior out of subjective awareness. Therefore, the treatment effects model is more suitable. We take the median of the instrumental variables for the continuous variables of firm financialization by the year. Levels of financialization that are greater than the median are set to 1, while levels that are less than the median are set to 0. This dummy variable is used as the instrumental variable for the treatment effect model in this paper. Based on the estimation results of the first stage, the instrumental variables are significantly correlated with the endogenous variables. However, since the two-step method cannot test whether the model has an endogeneity problem, we obtained the endogeneity test results using maximum likelihood estimation, and the Wald endogeneity test can reject the original hypothesis that there is no endogeneity problem at the 1% significance level. Therefore, the endogeneity problem of the corporate financialization dummy variable exists. The estimation results of the second stage of the two-step treatment effect model are reported in Column 4 of Table 6. According to this result, high and low financialization have adverse effects on ESG performance. In summary, after mitigating the endogeneity problem, our results remain robust.

4.4. Heterogeneity Analysis

To explore the heterogeneity of the impact of corporate financialization on ESG, a subsample regression is carried out based on the previous theoretical analysis and research design. This is undertaken to obtain two sets of estimation results by equity nature and by dependence on technology.

The first is a heterogeneity analysis based on the nature of ownership. State-owned enterprises have the dual attributes of participating in the market and political connections, so operators have multiple goals of obtaining profits and serving the government. The special nature of this ownership also makes state-owned enterprises take significant social responsibilities. Therefore, compared with private enterprises, the diversification goals of state-sponsored enterprises will diversify their financial motivations, which will theoretically weaken the impact of financial investment on ESG performance. The basic regression and robustness analyses above have shown that the financialization of enterprises has a negative effect on ESG performance. Therefore, this study examines whether the financialization of private enterprises has a strong inhibitory effect on ESG performance. From the estimated coefficients in the first and third columns of

Table 7. Estimation results based on different equity properties.

	ESG		ESG
	Private		State
FIN	−0.204 ***		−0.097
	(0.05)		(0.06)
FIND		−0.010 **		−0.012
		(0.01)		(0.01)
LEV	−0.286 ***	−0.282 ***	−0.309 ***	−0.309 ***
	(0.02)	(0.02)	(0.02)	(0.02)
SIZE	0.041 ***	0.041 ***	0.070 ***	0.071 ***
	(0.00)	(0.00)	(0.00)	(0.00)
TQ	−0.014 ***	−0.014 ***	0.001	0.001
	(0.00)	(0.00)	(0.00)	(0.00)
SALEG	−0.016 **	−0.015 **	−0.021 **	−0.021 **
	(0.01)	(0.01)	(0.01)	(0.01)
TENURE	0.001	0.002 *	0.004 ***	0.004 ***
	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.025 ***	0.026 ***	0.048 ***	0.048 ***
	(0.00)	(0.00)	(0.01)	(0.01)
OWN	0.033 *	0.031 *	−0.008	−0.009
	(0.02)	(0.02)	(0.03)	(0.03)
Con.	0.228 ***	0.224 ***	−0.845 ***	−0.859 ***
	(0.08)	(0.08)	(0.11)	(0.11)
Obs.	9056	9056	3405	3405
Pseudo R2	0.0086	0.0085	0.0192	0.0192
Wald chi2	1353.81	1344.23	1539.30	1526.01

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

, financialization in the sample of private enterprises will significantly inhibit ESG performance, and their financial investment behavior may be more motivated by short-term arbitrage, while state-owned enterprises are more motivated by financial gain. The diffuse nature of the motives for transformation makes this inhibition not obvious. The results in the second and fourth columns of Table 7 are similar, and the degree of financialization in state-owned enterprises has a less inhibitory effect on ESG performance than in private enterprises.

Since the sample data show the inhibitory effect of financial investment on ESG performance, we hope to obtain results under varying effects, the degree to which corporate financialization inhibits ESG is not the same. For the analysis of the theoretical part, we need to group regressions according to their technological dependence.

For this, we have to define indicators of technological dependence and define heavy and weak groups of dependence. Generally speaking, if a company is more dependent on technology, its demand for patented inventions will be higher. Considering the importance of environmental protection in the construction of ESG indicators, this article used the ratio of green inventions in the current year to the total number of inventions filed annually in the region to refer to the extent to which firms rely on technology. Enterprises that have a higher level of technology dependency than the median level of all enterprises in a year are classified as high technology dependency enterprises; otherwise, they are classified as low technology dependency enterprises.

Table 8. Estimation results based on different technology dependencies.

	ESG		ESG
	High Technology Dependence		Low Technology Dependence
FIN	−0.193 ***		−0.066
	(0.05)		(0.05)
FIND		−0.015 **		−0.002
		(0.01)		(0.01)
LEV	−0.265 ***	−0.260 ***	−0.347 ***	−0.345 ***
	(0.02)	(0.02)	(0.02)	(0.02)
SIZE	0.051 ***	0.052 ***	0.051 ***	0.051 ***
	(0.00)	(0.00)	(0.00)	(0.00)
TQ	−0.005 **	−0.005 *	−0.019 ***	−0.019 ***
	(0.00)	(0.00)	(0.00)	(0.00)
SALEG	−0.015 **	−0.015 **	−0.008	−0.007
	(0.01)	(0.01)	(0.01)	(0.01)
TENURE	0.002 *	0.002 *	0.003 ***	0.003 ***
	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.036 ***	0.036 ***	0.021 ***	0.021 ***
	(0.01)	(0.01)	(0.01)	(0.01)
OWN	−0.004	−0.007	0.065 ***	0.065 ***
	(0.02)	(0.02)	(0.02)	(0.02)
Con.	−0.219 **	−0.233 ***	0.080	0.079
	(0.09)	(0.09)	(0.09)	(0.09)
Obs.	6592	6592	6980	6980
Pseudo R2	0.0097	0.0096	0.0114	0.0114
Wald chi2	1144.93	1139.44	1477.57	1475.46

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

reports the differences in the impact of corporate financialization on ESG performance at different levels of technology dependence. The estimated coefficients in the first and third columns of Table 8 show that the suppression of corporate financialization on ESG performance is significant in the high-technology-dependent sample, while the ESG performance of low-technology-dependent firms is not significantly influenced by corporate financialization. The results in the second and fourth columns of Table 8 exhibit the same results. Overall, consistent with the theoretical scenario proposed in Hypothesis 2, the financial investment behavior of high-technology-dependent firms is more inhibitory to ESG performance.

In summary, the discussion of the subsample in terms of the nature of equity and the degree of technology dependence reveals that there is heterogeneity in the impact of corporate financialization on ESG performance, and Hypothesis 2 is satisfied. Financing is more detrimental to ESG development for private firms, which are more likely to pursue arbitrage motives. In addition, the sustainability of high-technology-dependent firms is more violated by financial investments than low-technology-dependent firms.

5. Influence Mechanism Test

Based on the analysis of the impact mechanism in the hypothesis section of the study, it is believed that the impact of corporate financialization on a company’s ESG performance may be transmitted through three channels. Specifically, that is the short-term wealth effect, the green resource appropriation effect, and the equilibrium target effect, respectively.

Firstly, the logic of the short-term wealth effect shows that firms are prone to financialization in order to achieve short-term wealth increases when the cost of entity business increases and profits decline. This process affects the long-term intrinsic value growth of firms by crowding out entity investment. Corporate financialization has a relatively weak dampening effect on ESG performance for companies with a high degree of crowding out. However, it is more obvious for companies without a high degree of squeeze. Then, this channel can be verified. Since the results of studies based on empirical evidence from Chinese-listed firms have pointed out that the stronger the arbitrage motive, the higher the degree of financialization crowding out entity capital [57]. Therefore, we use the arbitrage preference indicator to refer to the degree of crowding out entity capital by firms’ financialization behavior. Our construction of the arbitrage preference indicator first stems from theories related to the financialization of firms. There is evidence in the existing literature that the motives for the financialization of enterprises are mainly arbitrage motives and capital reserve motives. The corresponding measurement indicators are often the profitability of financial assets and the level of financing constraints. For example, depending on the type of company assets, the ratio of interest income and investment income to net profit can measure the dependence of enterprises on the return of financial assets [58], and the level of this dependence can indicate the strength of the arbitrage motive. Han & Qiu [59] suggest that the stronger the financing constraint, the stronger the preventive reserve motive of enterprises, so the level of financing constraint can indicate the strength of the capital reserve motive within enterprises.

This article develops an arbitrage preference indicator based on the respective indicators since both motives exist. Firstly, we use the sum of interest income and investment income as a proportion of net income to construct a continuous variable to measure the arbitrage motive. The larger the value of this indicator, the stronger the arbitrage motive. Secondly, the SA index is used to measure the degree of financing constraints of the firm (Other indices that traditionally measure the degree of financing constraints are KZ and WW. However, given the strong endogeneity of both, it is relatively common to choose the SA index in the study. The specific measurement formula is: SA = −0.737 × Size + 0.043 × Size² − 0.040 × Age, where Size is the total assets of the enterprise divided by 1,000,000 and then taken as the logarithm, and Age is the number of years of listing). Finally, based on their respective annual medians, arbitrage motives and capital reserves are each subdivided into 421 groups (As some samples share the same arbitrage motive and capital reserve motive, they will lose more sample cost value if the quantile division is not fine enough. In view of the fact that group 421 is the smallest group in which the sample loss value is less than 10 for the first time, we believe that further increasing the number of groups in the sample division will not have a significant impact on the actual results, so the number of groups in the annual quantile division is finally established as group 421), when the group of arbitrage motive is greater than the group of capital reserve motive, counted as 1 (high arbitrage preference), otherwise 0. Column 1 in

Table 9. Mechanism test results.

	ESG		ESG		ESG
	High Arbitrage Preference	Low Arbitrage Preference	High Green Dev.	Low Green Dev.	High Growth	Low Growth
FIN	−0.030	−0.192 ***	−0.115 **	−0.126 **	−0.022	−0.151 ***
	(0.05)	(0.07)	(0.05)	(0.05)	(0.05)	(0.05)
LEV	−0.329 ***	−0.264 ***	−0.290 ***	−0.319 ***	−0.296 ***	−0.259 ***
	(0.02)	(0.02)	(0.02)	(0.02)	(0.02)	(0.02)
SIZE	0.078 ***	0.038 ***	0.059 ***	0.046 ***	0.040 ***	0.052 ***
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
TQ	−0.004	−0.014 ***	−0.011 ***	−0.013 ***	−0.010 ***	−0.024 ***
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
SALEG	−0.031 ***	0.014 *	−0.004	−0.018 ***	−0.011	−0.011
	(0.01)	(0.01)	(0.01)	(0.01)	(0.01)	(0.01)
TENURE	0.003 ***	0.002 *	0.004 ***	0.001	0.003 ***	0.001
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.031 ***	0.018 ***	0.027 ***	0.027 ***	0.029 ***	0.027 ***
	(0.01)	(0.01)	(0.01)	(0.01)	(0.00)	(0.01)
OWN	−0.033 *	0.081 ***	0.091 ***	0.011	0.050 ***	0.002
	(0.02)	(0.02)	(0.02)	(0.02)	(0.02)	(0.02)
Con.	−0.625 ***	0.236 **	−0.492 ***	0.130	0.142 *	−0.268 ***
	(0.09)	(0.09)	(0.11)	(0.08)	(0.08)	(0.09)
Obs.	6846	6693	6362	7210	7218	6354
Pseudo R2	0.0143	0.0112	0.0114	0.0102	0.0089	0.0118
Wald chi2	1636.83	669.94	76,187.77	1255.62	1165.02	1238.37

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

is the high arbitrage preference group, representing a strong degree of entity capital crowding out. In contrast, Column 2 is the low arbitrage preference group, implying a relatively modest degree of entity capital crowding out. From the results, the regression coefficients of the lower extruding group are more significant, and the short-term wealth effect channel is verified.

In the next section, we will examine the second impact path. Since the benchmark regression results have verified that the impact of corporate financialization on ESG performance is negative, corporate financial investment will affect the ESG performance of a firm by appropriating its green resources. However, since there is no specific data on the composition of green resources at the firm level, we are unable to measure the degree of green resource crowding out by direct quotation or measurement. To address this issue, we revisit the transmission logic of the pathway and make a backward projection based on it. Firstly, if the financial investment behavior of firms appropriates firms’ green resources and thus inhibits sustainable growth opportunities, then once the green resource appropriation problem is mitigated, the extent to which ESG performance is inhibited by corporate financialization will also be mitigated. Therefore, if we validate the benign changes brought about by the alleviation of the green encroachment problem, then the transmission effect of the channel can naturally be validated as well.

Combined with the existing system in China, the green finance policy is the most comprehensive and significant policy to promote green development at present. By providing them with environmental loans, this policy relieves the financial pressure on enterprises. It also enhances their awareness of green development and is currently the most efficient strategy to alleviate the problem of green resource encroachment. Therefore, we divide the sample into two groups based on regional financial development indexes. A province or city with an index higher than the average of all provinces or cities in the current year would be classified as a High Green Financial Development group. Regression results are presented in the third column of Table 9. However, the opposite is true for the low green financial development group, and the results are presented in the fourth column of Table 9. From the results, the percentage change in the suppression of ESG performance per unit change in corporate financialization is smaller in high green financial development regions than in low green financial development regions. That is, once the green resource encroachment problem is mitigated, then the damage of corporate financialization to ESG performance is also diminished. Indirectly, it shows that green resource encroachment is one of the paths through which corporate financialization affects ESG performance.

The last path we want to test is the equilibrium target effect. Since the equilibrium goal and equilibrium capability of a company are relatively abstract concepts, they cannot be measured directly. From a sustainability concept point of view, the focus of a company on optimizing its ESG performance is on balance between profit and responsibility, so establishing and achieving the balance can be beneficial to a company’s long-term value. It follows that if the transmission path of the equilibrium goal effect exists, the degree of ESG suppression by corporate financialization should also be mitigated once the corporate equilibrium concept is enhanced. It has been shown that when a company’s traditional financial performance shows positive growth, then it is more likely to achieve scale improvement. It can passively enhance its balanced development concept through international competition and socially responsible activities. In addition, it is also more likely to meet balanced goals due to better financial performance. This means that improving financial performance will help enterprises attain their balanced development goals. The companies in the fifth column of Table 9 are the group for which the growth rate of return on assets (ROA), representing financial performance, is higher than the average growth rate of all companies in a year, and the regression results of the remaining companies are presented in the last column of Table 9. From the results, the inhibitory effect of corporate financialization on ESG performance is no longer significant in the high-growth group, indicating that the enhancement of the equilibrium target helps mitigate the negative effect of corporate financialization on ESG performance, and the equilibrium target channel is verified.

6. Further Analysis

This paper further explores the moderating effect of green technology innovation on corporate financialization affecting ESG performance. Why choose “green technology innovation” as the moderating variable? On the one hand, the concept of green technology innovation can be viewed from a broader perspective as an innovation variable that involves the environment, society and corporate governance. Through green technology innovation [60,61], enterprises can not only obtain economic benefits and improve the ecological environment but also actively fulfil social responsibilities through low-carbon pursuits [62,63]. This will help the green development of society, gain the trust of the public [64] and bring about a series of “chain reactions”. Such as business market expansion and corporate governance structure optimization [65,66]. Social benefits are also significant. On the other hand, green technology innovation is a significant breakthrough that mitigates the negative effects of financialization. Once this moderating variable is verified, the policy focus will be clearer, and the “chain reaction” to improve the performance of ESG will be better displayed.

One of the channels through which corporate financialization undermines ESG performance is the appropriation of green resources. Therefore, the negative impact of financialization on ESG performance will inevitably be mitigated through green technology enhancement and the reduced appropriation of related resources. When financial investment squeezes the green resources of the company, thus affecting the company’s goodwill and even violating environmental regulations, the company will certainly try to compensate for or mitigate this negative impact of financialization on the company’s social reputation and customer trust relationship by implementing green governance. Green technology innovation is the way for many enterprises to improve their green governance ability. The assistance of financial technology to green technology innovation not only improves the green governance ability of enterprises but also reduces the cost of green development. Green technology innovation is naturally favored by enterprises because it can effectively meet the requirements of sustainable development and reduce the cost of innovation inputs.

In the context of green technology innovation, prevalent investment behavior reveals a lack of corporate sustainable development concepts, such as environmental protection and responsibility, as well as an inefficient and unbalanced governance framework. Additionally, the inability of company financialization to function as a reserve is triggered by the lack of green technology innovation capacity. With financialization playing a major role in short-sighted behavior, improving green technology innovation capability will lay the foundation for better green information disclosure and reduce excess capital expenditures. On the one hand, green technology innovation can reduce information asymmetry at the level of green resources. This can reshape the image of corporate social responsibility [67] and enhance the possibility of rational financial investment. There is no doubt that in the process of green technology innovation, enterprises will need more and more transparent green information disclosure. This will result in a higher company reputation. As a result of the green innovation process, companies will take the initiative to raise their R&D expenditures. This will avoid a decline in external expectations of their valuation from excessive financialization of the information disclosure process. In contrast, green technology innovation can mitigate the short-term wealth effect caused by agency problems. As mentioned above, managers will be pressured by short-term performance to enhance the short-term wealth of the company. However, green technology innovation is considered a technological tool that can achieve harmony between humans and nature because it can reduce energy consumption and follow ecological, economic laws. If managers can pull off the green technology innovation of enterprises, it will enhance their green management concept and strategic height, thereby expanding their development opportunities and improving their own personal value. Therefore, at the level of green technology innovation enhancement, the manager’s agency friction problem related to short-term wealth achievement through financialization will be reduced, and the resulting green resource crowding-out phenomenon will be alleviated. In summary, green technology innovation will mitigate the negative effect of financialization on corporate ESG performance.

To test the above assumptions, we include the interaction item of green technology innovation and green technology innovation and corporate financialization in the base regression. Among them, the green technology innovation indicators include the number of patents obtained by listed companies for green utility models, the number of patents obtained by listed companies for green inventions, the number of patents applied for by listed companies for green utility models, and the number of patents applied for by listed companies for green inventions.

Table 10. Test results on the moderating effect of green technology innovation.

	ESG
	Green Utility Access	Green Inventions Access	Green Utility Application	Green Invention Application
FIN	−0.232 ***	−0.190 ***	−0.208 ***	−0.218 ***
	(0.04)	(0.05)	(0.04)	(0.04)
UMG	0.003 ***
	(0.00)
M1	0.041 **
	(0.02)
INVG		0.009 ***
		(0.00)
M2		0.041 *
		(0.02)
UMA			0.003 ***
			(0.00)
M3			0.026
			(0.02)
INVA				0.003 ***
				(0.00)
M4				0.006
				(0.01)
LEV	−0.305 ***	−0.300 ***	−0.303 ***	−0.299 ***
	(0.01)	(0.02)	(0.01)	(0.01)
SIZE	0.050 ***	0.050 ***	0.050 ***	0.048 ***
	(0.00)	(0.00)	(0.00)	(0.00)
TQ	−0.012 ***	−0.011 ***	−0.012 ***	−0.012 ***
	(0.00)	(0.00)	(0.00)	(0.00)
SALEG	−0.021 ***	−0.025 ***	−0.020 ***	−0.020 ***
	(0.01)	(0.01)	(0.01)	(0.01)
TENURE	0.003 ***	0.002 ***	0.003 ***	0.003 ***
	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.029 ***	0.029 ***	0.028 ***	0.027 ***
	(0.00)	(0.00)	(0.00)	(0.00)
OWN	0.027 *	0.024	0.031 **	0.035 **
	(0.01)	(0.02)	(0.01)	(0.01)
Con.	−0.032	−0.027	−0.036	0.015
	(0.06)	(0.07)	(0.06)	(0.06)
Obs.	12,042	9324	12,072	12,121
Pseudo R2	0.0107	0.0115	0.0107	0.0108
Wald chi2	2311.64	1962.16	2319.69	2407.10

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

reports the relevant test results. Column 1 shows the results of the moderating effect of green utility patent acquisition. The interaction item M1 between corporate financialization and green utility patent acquisition is significantly positive. Column 2 shows that the interaction item M2 between corporate financialization and green invention acquisition is also significantly positive. Therefore, at the level of green patent acquisition, green technology innovation is able to mitigate the inhibitory effect of corporate financialization on ESG performance. However, the results in Columns 3 and Column 4 indicate that there is no significant moderating effect on both green utility applications and green invention applications. This suggests that green patent applications can only reflect the green development philosophy of firms and that only authentically acquired green patents can bring about a substantial reversal.

Micro firms have independent decision-making behavior. In spite of this, the same group has competitive or imitation motives due to comparable living conditions. This makes it easier for firms to pay attention to and follow the behavior of other firms in the same group. This avoids the costs and risks of independent decision-making and achieves the benefits of group effect radiation [68].

The reason why green technology innovation can have a moderating effect on the suppression of ESG performance by financialization is that green technology innovation can pull the green development capability of enterprises and achieve transformation [69] and upgrading at a controlled cost [70], thus enhancing the overall competitiveness of enterprises.

Following the green technology innovation activities of similar groups can be seen as an instinctive attempt by enterprises to avoid harm. According to market competition theory, innovation behavior is the key to determining the core competitiveness of companies [71]. In order to prevent the loss of competitive advantage, the behavior of similar groups can easily influence the decision of enterprises regarding the level of green technology. In particular, if enterprises in the same region generally have higher green technology innovation capability, they will naturally be more willing to enhance their capability in this field out of the desire to achieve competitiveness that can compare with or even compete with the same group. Further, in the process of subjective decision-making, enterprises will consciously refer to the development trends of similar groups. Developing the green technology innovation skills of the surrounding groups will also lead to the improvement of green behavior norms and regulatory thresholds in the region [72]. At this point, enterprises will be motivated to improve their green technology innovation skills in order to avoid compliance risks. Hence, if the level of green technology innovation in the surrounding area is high, it is likely to cause a catch-up effect and boost enterprise capabilities in this area, reducing the crowding out of green resources and subsequently having a more obvious regulatory effect.

Table 11. Group effect of the moderating effect of green technology innovation.

	ESG
	Green Utility Access		Green Inventions Access
	High Green Utility Get Area	Low Green Utility Get Area	High Green Invention Get Area	Low Green Inventions Get Area
FIN	−0.302 ***	−0.182 ***	−0.274 ***	−0.111 *
	(0.06)	(0.06)	(0.07)	(0.07)
UMG	0.003 ***	0.003 ***
	(0.00)	(0.00)
M1	0.073 ***	−0.011
	(0.02)	(0.03)
INVG			0.007 ***	0.012 ***
			(0.00)	(0.00)
M2			0.063 **	−0.024
			(0.03)	(0.07)
LEV	−0.275 ***	−0.339 ***	−0.286 ***	−0.318 ***
	(0.02)	(0.02)	(0.02)	(0.02)
SIZE	0.055 ***	0.042 ***	0.058 ***	0.040 ***
	(0.00)	(0.00)	(0.00)	(0.00)
TQ	−0.010 ***	−0.013 ***	−0.009 ***	−0.012 ***
	(0.00)	(0.00)	(0.00)	(0.00)
SALEG	−0.025 ***	−0.017 **	−0.024 ***	−0.025 ***
	(0.01)	(0.01)	(0.01)	(0.01)
TENURE	0.002 **	0.003 **	0.003 **	0.001
	(0.00)	(0.00)	(0.00)	(0.00)
PAY	0.030 ***	0.033 ***	0.028 ***	0.035 ***
	(0.01)	(0.01)	(0.01)	(0.01)
OWN	0.085 ***	−0.024	0.046 **	0.009
	(0.02)	(0.02)	(0.02)	(0.02)
Con.	−0.354 ***	0.155 *	−0.367 ***	0.186 *
	(0.10)	(0.09)	(0.11)	(0.10)
Obs.	6003	6039	4557	4767
Pseudo R2	0.0126	0.0100	0.0130	0.0111
Wald chi2	1516.71	1009.16	1296.30	885.90

Annotates: ***, ** and * represent significance at 1%, 5%, and 10% levels, respectively. The Robust standard error in parentheses.

shows the results of the tests of the above hypotheses. Since the results of the above tests indicate that only green technology innovation acquisition has a moderating effect, the tests at the level of green technology innovation applications are not included in this section of the group effect test. First, we divide the regions into high and low groups according to the annual median number of green patent acquisitions. Column 1 shows the results of the moderating effect of the high green utility acquisition region. In this equation, we focus on the interaction item M1 between corporate financialization and green utility patent acquisition, which is still significantly positive. In contrast, the results in Column 2 show that the interaction item is no longer significant in the sample of low green utility acquisition regions. Combining the results in Column 1 and Column 2, the moderating effect of high green utility acquisition areas is significantly larger than that of low green utility acquisition areas. Green technology innovation has a significant group effect. Similarly, in Columns 3 and 4 of Table 11, the interaction item between corporate financialization and green invention acquisition is significant only in the high green invention acquisition region. In summary, there is a significant group effect of green technology innovation on the moderating effect of corporate financialization on ESG.

7. Conclusions

7.1. Discussion

The study aimed to investigate the relationship between corporate financialization and ESG performance. Our study demonstrates that the financialization of companies can have a robust and significant negative impact on their ESG performance. We also provide evidence of the existence of different financialization-ESG performance sensitivities in state and private firms, as well as in companies with varying levels of technology reliance. Mechanistic analysis shows that financialization behavior can inhibit corporate ESG performance through the crowding out of physical capital and green resources, balancing the lack of development goals and capabilities.

The results of the study showed that: (1) Corporate financialization behavior significantly inhibits ESG performance. Both high and low levels of financialization are detrimental to ESG. This finding remains robust to indicator changes, sample compression and endogeneity mitigation. (2) The influence of corporate financial investment behavior on ESG performance under different motivations is heterogeneous. (3) Corporate financialization will affect ESG performance through three paths: green development highly related to environmental factors, resource appropriation reflecting social responsibility and the short-term wealth effect reflecting governance ability. (4) Green technology innovation will reversely moderate the inhibition of corporate financialization on ESG performance, and this benign regulatory effect is more obvious in areas with better green development, showing a distinct co-group effect.

7.2. Implications

Our research also provides insights into corporate strategy and government policy. At the level of strategic corporate development, theoretically, corporate financialization can have a positive effect through the capital reserve function. However, our tests show that financialized investment behavior effectively undermines equilibrium development performance. This implies that a majority of firms’ financialization behavior prefers short-term arbitrage motives. Indeed, the strategy of increasing financial asset allocation with a view to improving overall performance in the short term is classic value-deviation behavior that is prone to significant systemic risks in the long term. Particularly in the context of the growing challenges of climate change and the wealth gap, corporate growth strategies must be elevated to the level of long-term value. Faced with the objective difficulties of diminishing marginal returns on capital and increasing pressure to transform and upgrade, companies should focus mainly on their main business dimension. They should continue to enhance the endogenous return of their main business through environmental improvements, R&D innovation and responsible engagement. At the policy level, some value-oriented enterprises have already benefited from green technology innovation. Therefore, the relevant government departments should pay special attention to the lack of development of green technology innovation by enterprises. They should provide early guidance and support in terms of development concepts and financing policies. As an example, enterprises are required to improve their disclosure of green technology innovation information. Furthermore, the government can facilitate the investment of funds into green development businesses by external financial institutions. Further, the group effect of the regulatory effect shows that the inter-regional transmission of green technology innovation is more likely to boost the value of the whole industry. Therefore, policies can deepen the beneficial effects of the group effect on ESG through inter-regional cooperation in green technology innovation.

7.3. Limitations and Future Research

According to the limitations of the study, future research is expected. First of all, although the measurement framework of ESG has reached a preliminary consensus, there are still differences in the specific contents of the three dimensions of environment, society and governance. We will continue to focus on the development and application of this indicator and conduct in-depth analysis and research on this issue at a more detailed level. Secondly, this research focuses on the impact of microenterprises’ financialization behavior on their ESG performance. In the future, financial input and ESG report disclosure can be discussed at the macro level. Finally, we can conduct a more in-depth study of the moderating effects. From more perspectives, such as the economy and society, we can examine the moderating effect of this problem. We can also take the financial dummy variable as a moderating variable for further study. Specifically, a high level of financialization will directly inhibit the improvement of ESG performance, which is likely to moderate the impact of other factors on ESG performance. As an example, improving enterprise management ability may contribute to improving its ESG performance, but an excessive level of financialization would undermine this effect; alternatively, increased economic uncertainty may hinder the growth of ESG performance, in which case, a higher level of financialization might reinforce the inhibition.