Does ESG Performance Improve the Financial Performance of Enterprises in China? The Mediating Role of Financial Constraints

The purpose of this research is to investigate the relationship between ESG performance and financial performance of Chinese firms listed on the A-share market. It spans the years 2015 through 2022. This research also looks at the role of finance restrictions in mediating this connection. The findings indicate that a company's environmental, social, and governance performance is strongly and favourably connected to its financial performance. Notably, governance performance appears as a critical driver of improved financial results. The mediation mechanism test findings show that finance restrictions moderate the relationship between ESG performance (and its aspects) and business financial performance. Furthermore, robustness tests indicate that the impact of ESG performance and its dimensions to company financial performance is particularly obvious in highly polluting businesses and firms functioning in very market-oriented contexts. The study's results assist businesses, investors, and others in making more scientific judgements.