ESG, Climate Risk, and Debt Management—Evidence from Chinese Listed Companies
Abstract
1. Introduction
2. Literature Review and Hypothesis Development
2.1. Literature Review
2.2. Theoretical Background
2.3. Hypothesis Development
3. Methodology
3.1. Sample
3.2. Empirical Model
3.3. Measuring of Variables
3.3.1. Measuring Debt Management
Interest-Bearing Debt Ratio (IDR)
The Firm’s Target Leverage Deviation (AbsDev)
3.3.2. Measuring ESG
3.3.3. Measuring Climate Risk Management
3.3.4. Control Variables
3.3.5. Other Variables
4. Result
4.1. Descriptive Statistics
4.2. Baseline Regressions
4.3. Robustness Test
4.3.1. Instrumental Variable
4.3.2. Other Robustness Tests
- (1)
- Addition of control variables: drawing on W. Li et al. (2024b), the current study incorporated the chairperson of the board and the general manager who hold concurrent positions (DUAL) as shown in Table 8.
- (2)
- The variable was replaced from the interest-bearing debt ratio (IDR) with the leverage ratio (LEV) to examine the impact of different debt ratio indicators on the results as shown in Table 9.
- (3)
- To assess corporate ESG, the current study referenced and compared the applicability and coverage of several mainstream ESG rating databases. The MSCI ESG rating database primarily covers companies included in the MSCI ACWI Global Index or the MSCI China Index. As of 2021, the MSCI China Index included 423 companies listed in Mainland China (J. Z. Chen et al., 2025). MSCI’s ESG ratings are based on company annual reports, government databases, academic and non-governmental organization data, as well as alternative data sources, emphasizing data diversity and credibility (Gyönyörová et al., 2023).
- (4)
- The environmental dimension (E) has the largest number of quantifiable indicators as it relies on extensive physical measurement data (e.g., emissions, resource consumption) and technical metrics. In contrast, the social (S) and governance (G) dimensions include more subjective assessments, making them more difficult to quantify (Berg et al., 2022). Moreover, as a foreign rating agency, BloomBerg is less susceptible to influence from Chinese listed companies. Therefore, this study used BloomBerg’s environmental rating, a rating from a foreign agency, as an independent variable. This allowed for a more objective examination of ESG ratings, with fewer external influences, based on the environmental rating.
- (5)
- This study replaced time fixed effects with a time trend to validate the model’s stability and ensure that the results were not influenced by specific time shocks. As shown in Table 13, this study used the time trend variable instead of annual fixed effects for robustness checks.
- (6)
- A robustness test was conducted by lagging the independent and control variables by one period, as shown in Table A3, with the results consistent with the baseline regression.
4.4. Further Analysis
4.4.1. Heterogeneity Analysis of ESG and Shares Pledged by the Controlling Shareholder
4.4.2. Moderating Effect Analysis
The Moderating Effect of Corporate Climate Risk Management
4.4.3. Analysis of Industries with Financing Restrictions
4.4.4. ESG, Debt Management: Impact on Green Innovation
5. Discussion
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Acknowledgments
Conflicts of Interest
Abbreviations
ESG | Environmental, social, and governance |
Appendix A
Number of Firms | N | Mean | Median | Std. dev. | Min | Max | |
---|---|---|---|---|---|---|---|
LESG | 89 | 263 | 7.764 | 8 | 0.877 | 4 | 9 |
LESGHEXUN | 89 | 263 | 4.913 | 5 | 1.006 | 1 | 7 |
LESGMSCI | 89 | 263 | 6.338 | 6 | 2.132 | 1 | 9 |
LESGBloomBerg | 89 | 263 | 38.535 | 36.687 | 9.168 | 19.304 | 61.634 |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | |
---|---|---|---|---|---|---|---|---|---|---|---|---|
Variables | IDR | AbsDev | PladgeStock | IDR | AbsDev | PladgeStock | IDR | AbsDev | PladgeStock | IDR | AbsDev | PladgeStock |
LESGBloomBerg | −0.002 * | −0.000 | −0.000 | |||||||||
(0.001) | (0.001) | (0.000) | ||||||||||
LESGMSCI | −0.004 ** | −0.000 | −0.001 | |||||||||
(0.002) | (0.001) | (0.001) | ||||||||||
LESG | −0.025 ** | 0.005 | 0.001 | |||||||||
(0.010) | (0.004) | (0.005) | ||||||||||
LESGHEXUN | −0.014 ** | 0.005 * | −0.004 | |||||||||
(0.006) | (0.002) | (0.002) | ||||||||||
Observations | 263 | 263 | 263 | 263 | 263 | 263 | 263 | 263 | 263 | 263 | 263 | 263 |
R-squared | 0.952 | 0.600 | 0.864 | 0.949 | 0.583 | 0.864 | 0.957 | 0.117 | 0.021 | 0.955 | 0.123 | 0.031 |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | AbsDev | PladgeStock |
LESGHEXUN | −0.003 *** | −0.001 *** | −0.002 *** |
(0.001) | (0.000) | (0.001) | |
Control variables | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 18,613 | 18,613 | 18,613 |
R-squared | 0.823 | 0.003 | 0.048 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
IDR | IDR | IDR | IDR | |
LESG + ESG × ClimateRisk × 0 | −0.002 * | |||
(0.001) | ||||
LESG + ESG × ClimateRisk × 0.3 | −0.006 *** | |||
(0.002) | ||||
LESG + ESG × ClimateRisk × 0.48 | −0.008 *** | |||
(0.002) | ||||
LESG + ESG × ClimateRisk × 0.65 | −0.010 *** | |||
(0.003) | ||||
LESG + ESG × PhysicalRisk × 0 | −0.003 ** | |||
(0.001) | ||||
LESG + ESG × PhysicalRisk × 0.3 | −0.089 *** | |||
(0.030) | ||||
LESG + ESG × PhysicalRisk × 0.48 | −0.140 *** | |||
(0.047) | ||||
LESG + ESG × PhysicalRisk × 0.65 | −0.189 *** | |||
(0.064) | ||||
LESG + ESG × TransitionRisk × 0 | −0.002 * | |||
(0.001) | ||||
LESG + ESG × TransitionRisk × 0.3 | −0.006 *** | |||
(0.001) | ||||
LESG + ESG × TransitionRisk × 0.48 | −0.008 *** | |||
(0.002) | ||||
LESG + ESG × TransitionRisk × 0.65 | −0.010 *** | |||
(0.003) | ||||
Control variables | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes | Yes |
Observations | 22,668 | 22,668 | 22,668 | 22,668 |
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Source | Q. Li et al. (2024b), Du et al. (2023), Annual Financial Reports of Listed Companies | |
Climate risk lexicon | Transition risk | Recycling, usage efficiency, atomic energy, turbine-driven energy, fossil gas, efficiency improvement, fuel oil, revitalization, carbon mitigation, ecological conservation, eco-friendly, climate-neutral, energy saving, fuel, hydrological efficiency, sun-powered, superior efficiency, fuel expenditure, power consumption, energy demand, efficacy |
Physical risk | Severe catastrophe, seismic activity, violent storm system, tsunami, hydrological extremes, extreme, critical, urban flooding, strong wind, dust, hurricane, frost, freezing conditions, disturbance, mudslide, landslide, frozen obstruction, snow disaster, drought, flooding, heavy rain, tornado, hail, flood disaster, precipitation, subfreezing, snowstorm, frost damage, aridity, drought condition, heavy rainfall, flood, severe cold, sandstorm, climate, atmospheric conditions, wet, water temperature, thermal decline, chilling, temperature, rainfall, thermal level, rainwater, wet-phase interval, rain volume, precipitation, cloudburst-prone, rainy, extreme cold, frost period, flood season, high humidity, water condition, water level, light, hydric deficit, high altitude and cold, frigid front, ground collapse, subsurface aqua, inundation status, surface, water storage. |
Variable | Definition |
---|---|
LEV | Debt ratio: total assets/total liabilities |
LESGHEXUN | The one-period lag of the ESG rating issued by the HEXUN database |
Green | Corporate green innovation ln (the number of independently applied green invention patents in that year + the number of independently applied green utility model patents in that year + 1) (G. Li et al., 2022) |
DUAL | Whether the roles of the Chairman and the CEO are held by the same person |
N | Mean | Median | Std. Dev. | Min | Max | |
---|---|---|---|---|---|---|
IDR | 22,818 | 0.218 | 0.201 | 0.162 | 0.000 | 0.648 |
AbsDev | 22,818 | 0.043 | 0.029 | 0.045 | 0.000 | 0.622 |
SharePlage | 22,818 | 0.077 | 0.000 | 0.115 | 0.000 | 0.855 |
LEV | 22,818 | 0.449 | 0.448 | 0.199 | 0.027 | 0.925 |
LESG | 22,818 | 6.547 | 6.000 | 1.122 | 1.000 | 9.000 |
LESGHEXUN | 22,818 | 4.121 | 4.000 | 1.084 | 1.000 | 8.000 |
ClimateRisk | 22,818 | 0.097 | 0.044 | 0.151 | 0.000 | 0.908 |
PhysicalRisk | 22,818 | 0.004 | 0.000 | 0.010 | 0.000 | 0.338 |
TransitionRisk | 22,818 | 0.097 | 0.041 | 0.175 | 0.000 | 2.609 |
Green | 22,818 | 0.353 | 0.000 | 0.804 | 0.000 | 6.848 |
SIZE | 22,818 | 22.412 | 22.237 | 1.286 | 19.525 | 26.430 |
FIXED | 22,818 | 0.216 | 0.183 | 0.163 | 0.002 | 0.736 |
SOE | 22,818 | 0.402 | 0.000 | 0.490 | 0.000 | 1.000 |
CASHFLOW | 22,818 | 0.047 | 0.046 | 0.068 | −0.224 | 0.257 |
BOARD | 22,818 | 2.133 | 2.197 | 0.200 | 1.609 | 2.708 |
TOP1 | 22,818 | 0.337 | 0.315 | 0.147 | 0.081 | 0.758 |
GROWTH | 22,818 | 0.163 | 0.104 | 0.408 | −0.660 | 4.330 |
BM | 22,818 | 1.185 | 0.763 | 1.302 | 0.051 | 10.142 |
DUAL | 22,818 | 0.247 | 0.000 | 0.431 | 0.000 | 1.000 |
ROE | 22,818 | 0.056 | 0.068 | 0.134 | −1.072 | 0.406 |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | AbsDev | PladgeStock |
LESG | −0.003 *** | −0.001 * | −0.002 ** |
(0.001) | (0.000) | (0.001) | |
SIZE | 0.060 *** | 0.003 *** | 0.006 ** |
(0.004) | (0.001) | (0.003) | |
FIXED | −0.138 *** | −0.017 *** | 0.000 |
(0.008) | (0.004) | (0.006) | |
SOE | 0.101 *** | −0.034 *** | −0.014 |
(0.019) | (0.006) | (0.014) | |
CASHFLOW | 0.006 | 0.003 | −0.058 *** |
(0.007) | (0.002) | (0.007) | |
BOARD | −0.193 *** | −0.022 *** | −0.017 |
(0.013) | (0.007) | (0.011) | |
TOP1 | −0.004 | 0.001 | −0.005 |
(0.009) | (0.003) | (0.008) | |
GROWTH | 0.011 | 0.015 ** | 0.275 *** |
(0.023) | (0.007) | (0.023) | |
BM | 0.004 ** | 0.014 *** | −0.002 |
(0.002) | (0.002) | (0.002) | |
Constant | 0.011 *** | −0.001 *** | −0.004 ** |
(0.002) | (0.001) | (0.001) | |
Year FE | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 22,669 | 22,669 | 22,669 |
R-squared | 0.818 | 0.266 | 0.725 |
Variables | IDR |
---|---|
LESG | −0.095 *** |
(0.027) | |
Control variables | Yes |
Year FE | Yes |
Firm FE | Yes |
Observations | 22,669 |
R-squared | −0.493 |
Underidentification test (Kleibergen–Paap rk LM statistic) | 26.926 *** (p = 0.000) |
Weak identification test (Cragg–Donald Wald F-statistic) (10% maximal IV size) | 42.008 (19.93) |
Hansen J-statistic (overidentification test of all the instruments) | 1.418 (p = 0.234) |
Variables | AbsDev |
---|---|
LESG | −0.003 *** |
(0.001) | |
Control variables | Yes |
Year FE | Yes |
Firm FE | Yes |
Observations | 21,529 |
R-squared | 0.018 |
Underidentification test (Kleibergen–Paap rk LM statistic) | 489.851 *** (p = 0.000) |
Weak identification test (Cragg–Donald Wald F-statistic) (10% maximal IV size) | 2040.989 (19.93) |
Hansen J-statistic (overidentification test of all the instruments) | 0.000 (p = 0.998) |
Variables | PladgeStock |
---|---|
LESG | −0.011 *** |
(0.001) | |
Control variables | Yes |
Year FE | Yes |
Firm FE | Yes |
Observations | 21,529 |
R-squared | 0.059 |
Underidentification test (Kleibergen–Paap rk LM statistic) | 480.851 *** (p = 0.000) |
Weak identification test (Cragg–Donald Wald F-statistic) (10% maximal IV size) | 2040.989 (19.93) |
Hansen J-statistic (overidentification test of all the instruments) | 0.549 (p = 0.459) |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | AbsDev | PladgeStock |
LESG | −0.004 *** | −0.001 * | −0.002 ** |
(0.001) | (0.000) | (0.001) | |
DUAL | −0.002 | −0.001 | −0.002 |
(0.003) | (0.001) | (0.003) | |
Control variables | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 22,669 | 22,669 | 22,669 |
R-squared | 0.811 | 0.022 | 0.073 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Variables | LEV | IDR | AbsDev | PladgeStock |
LESG | −0.007 *** | |||
(0.001) | ||||
LESGHEXUN | −0.004 *** | −0.001 *** | −0.003 *** | |
(0.001) | (0.000) | (0.001) | ||
Control Variables | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes | Yes |
Observations | 22,669 | 22,669 | 22,669 | 22,669 |
R-squared | 0.844 | 0.818 | 0.024 | 0.074 |
Number of Firms | N | Mean | Median | Std. dev. | Min | Max | |
---|---|---|---|---|---|---|---|
LESG | 3248 | 22,818 | 6.547 | 6 | 1.122 | 1 | 9 |
LESGHEXUN | 3248 | 22,818 | 4.121 | 4 | 1.084 | 1 | 8 |
LESGMSCI | 342 | 1127 | 6.244 | 6 | 2.263 | 1 | 9 |
LESGBloomBerg | 1249 | 8446 | 27.225 | 26.748 | 8.374 | 8.678 | 67.207 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
Variables | IDR | AbsDev | PladgeStock | IDR | AbsDev | PladgeStock |
LESGBloomBerg | −0.001 *** | −0.000 ** | −0.000 | |||
(0.000) | (0.000) | (0.000) | ||||
LESGMSCI | −0.002 * | −0.001 | 0.000 | |||
(0.001) | (0.001) | (0.001) | ||||
Constant | −0.972 *** | −0.010 | 0.133 | −1.302 ** | −0.256 * | 0.520 * |
(0.169) | (0.067) | (0.136) | (0.634) | (0.154) | (0.295) | |
Control variables | Yes | Yes | Yes | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes | Yes | Yes | Yes |
Observations | 8399 | 8399 | 8399 | 1095 | 1095 | 1095 |
R-squared | 0.855 | 0.277 | 0.777 | 0.924 | 0.387 | 0.888 |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | AbsDev | PladgeStock |
LBloomBergESGE | −0.000 ** | −0.000 | −0.000 |
(0.000) | (0.000) | (0.000) | |
Control variables | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 8316 | 8316 | 8316 |
R-squared | 0.854 | 0.274 | 0.778 |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | AbsDev | PladgeStock |
LESG | −0.004 *** | −0.001 * | −0.003 *** |
(0.001) | (0.000) | (0.001) | |
Timetrend | −0.013 *** | 0.000 | 0.010 *** |
(0.001) | (0.001) | (0.001) | |
Timetrendsq | 0.000 *** | −0.000 *** | −0.001 *** |
(0.000) | (0.000) | (0.000) | |
Control variables | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 22,668 | 22,668 | 22,668 |
R-squared | 0.810 | 0.027 | 0.091 |
Full Sample | State-Owned Enterprise | Non-State-Owned Enterprise | |
---|---|---|---|
Variables | PladgeStock | PladgeStock | PladgeStock |
LESG | −0.002 *** | −0.001 | −0.004 *** |
(0.001) | (0.001) | (0.001) | |
Control variables | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 22,668 | 9110 | 13,475 |
R-squared | 0.725 | 0.626 | 0.717 |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | IDR | IDR |
LESG | −0.002 * | −0.003 ** | −0.002 * |
(0.001) | (0.001) | (0.001) | |
ClimateRisk | 0.042 | ||
(0.047) | |||
LESG*ClimateRisk | −0.012 ** | ||
(0.006) | |||
PhysicalRisk | 1.675 ** | ||
(0.679) | |||
LESG*PhysicalRisk | −0.286 *** | ||
(0.100) | |||
TransitionRisk | 0.045 | ||
(0.038) | |||
LESG*TransitionRisk | −0.011 ** | ||
(0.005) | |||
_cons | −1.035 *** | −1.015 *** | −1.029 *** |
Control variables | Yes | Yes | Yes |
Year FE | Yes | Yes | Yes |
Firm FE | Yes | Yes | Yes |
Observations | 22,668 | 22,668 | 22,668 |
R-squared | 0.811 | 0.811 | 0.811 |
Non-Real Estate and Construction Industry | Real Estate and Construction Industry | |
---|---|---|
Variables | (1) | (2) |
LESG | −0.003 *** | −0.005 |
(0.001) | (0.006) | |
_cons | −1.096 *** | −1.584 *** |
(0.093) | (0.401) | |
Control variables | Yes | Yes |
Year FE | Yes | Yes |
Firm FE | Yes | Yes |
Observations | 21,514 | 1146 |
R-squared | 0.826 | 0.767 |
Variables | IDR |
---|---|
DID | −0.011 * |
(0.006) | |
_cons | −1.011 *** |
(0.093) | |
Control variables | Yes |
Year FE | Yes |
Firm FE | Yes |
Observations | 22,668 |
R-squared | 0.810 |
(1) | (2) | (3) | |
---|---|---|---|
Variables | IDR | IDR | IDR |
DID | −0.000 | −0.010 | −0.002 |
(0.007) | (0.006) | (0.007) | |
ClimateRisk | −0.013 | ||
(0.021) | |||
ModdidCLIMATE | −0.072 *** | ||
(0.024) | |||
PhysicalRisk | −0.045 | ||
(0.180) | |||
ModdidPHYSICAL | −0.324 | ||
(0.311) | |||
TransitionRisk | −0.006 | ||
(0.018) | |||
ModdidTransitionRisk | −0.064 *** | ||
(0.022) | |||
Constant | −1.033 *** | −1.013 *** | −1.028 *** |
(0.094) | (0.093) | (0.094) | |
Observations | 22,668 | 22,668 | 22,668 |
R-squared | 0.811 | 0.811 | 0.811 |
(1) | (2) | |
---|---|---|
Variables | Green | Green |
IDR | 0.079 * | |
(0.041) | ||
LESG | 0.014 *** | |
(0.004) | ||
Constant | 0.375 *** | 0.299 *** |
(0.071) | (0.076) | |
Control variables | Yes | Yes |
Year FE | Yes | Yes |
Firm FE | Yes | Yes |
Observations | 22,668 | 22,668 |
R-squared | 0.734 | 0.734 |
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Zhao, Y.; Manaf, K.B.b.A.; Ayoup, H.b. ESG, Climate Risk, and Debt Management—Evidence from Chinese Listed Companies. Int. J. Financial Stud. 2025, 13, 118. https://doi.org/10.3390/ijfs13030118
Zhao Y, Manaf KBbA, Ayoup Hb. ESG, Climate Risk, and Debt Management—Evidence from Chinese Listed Companies. International Journal of Financial Studies. 2025; 13(3):118. https://doi.org/10.3390/ijfs13030118
Chicago/Turabian StyleZhao, Yang, Kamarul Bahrain bin Abdul Manaf, and Hazeline bt Ayoup. 2025. "ESG, Climate Risk, and Debt Management—Evidence from Chinese Listed Companies" International Journal of Financial Studies 13, no. 3: 118. https://doi.org/10.3390/ijfs13030118
APA StyleZhao, Y., Manaf, K. B. b. A., & Ayoup, H. b. (2025). ESG, Climate Risk, and Debt Management—Evidence from Chinese Listed Companies. International Journal of Financial Studies, 13(3), 118. https://doi.org/10.3390/ijfs13030118