Research On The Impact Of ESG Information Disclosure Transparency On Corporate Financing Cost

The financing decision is an important decision in the field of enterprise financial management,and it is the basic guarantee to realize value creation.Against the backdrop of profound changes unseen in a century,such as the spread of COVID-19 and economic recession,risk premiums in financial markets are rising,and corporate financing is in unprecedented difficulties.Therefore,under the dual challenges of rising risks caused by frequent uncertain events and declining profit growth caused by highquality economic transformation,it is not only of great theoretical significance to explore how enterprises solve the financing dilemma but also of great practical significance in China today.In the field of corporate financing,information asymmetry is regarded by scholars as an important factor affecting financing costs.The existing literature mainly explores the influencing factors of corporate financing costs from financial information such as accounting information quality and financial announcements.The frequent occurrence of global Environmental and Social risk events leads to the failure of financial information.Non-financial information,which symbolizes the concept of sustainable development of enterprises,has attracted wide attention,especially the three important dimensions of environmental,social,and corporate Governance referred to as ESG.It has gradually become an important factor affecting financing costs and is praised by investors as the "second financial report" of enterprises.At the same time,under the major deployment of the Fifth Plenary Session of the 19 th CPC Central Committee on promoting the comprehensive green transformation of the economy and society and the urgent need to achieve the goal of "carbon neutral" and "carbon peak",it has become an important research issue to explore how ESG information disclosure enables the high-quality transformation of micro-enterprises.Information disclosure can be divided into quantity and quality,in the field of financial accounting information disclosure quantity is also known as transparency.As ESG information disclosure is non-financial information,its quality is prone to be investigated and judged by the subjective factors of the third party,resulting in serious differences.Therefore,this paper focuses on the objective quantity of corporate information disclosure,namely the transparency of ESG information disclosure.Based on information asymmetry theory,principal-agent theory and sustainable development theory,this paper comprehensively examines the differential impact of ESG information disclosure transparency and its three dimensions on equity financing cost,debt financing cost and overall corporate financing constraints,as well as the moderating effect of economic policy uncertainty.Furthermore,it further explores the heterogeneity analysis and mechanism test of the impact of ESG information disclosure transparency on corporate financing cost in different scenarios,and finally draws the following research conclusions:(1)The transparency of ESG information disclosure will reduce the company’s equity financing cost.First of all,the disclosure degree of ESG information will send the signal of high-quality development of the enterprise to shareholders,thus improving shareholders’ expectation of the future earnings of the enterprise and significantly reducing the equity financing cost of the company.This effect is mainly reflected in the environmental and social responsibility dimensions of long-term interest orientation,while the transparency of corporate governance information disclosure including shortterm interest orientation will increase the cost of corporate equity financing.Secondly,economic policy uncertainty will weaken shareholders’ expectations of future earnings,which is reflected in the negative relationship between ESG information disclosure transparency and corporate equity financing costs.Further,heterogeneity analysis finds that the negative effect of ESG information disclosure transparency on equity financing cost is stronger in small and medium-sized companies,private companies,lowcompetition industries,heavy pollution industries,and low-marketization regions.Mechanism analysis shows that ESG information disclosure transparency reduces equity financing costs through three paths: reducing long-term stock price risk,improving the external information environment,and increasing long-term development value.(2)ESG information disclosure transparency will increase corporate debt financing costs.First of all,the disclosure of ESG information will make bank creditors expect enterprises to disperse too many resources to long-term projects,which will lead to a decline in short-term solvency,and therefore require higher risk compensation,thus increasing the cost of corporate debt financing.This effect is mainly reflected in the environmental and social responsibility dimensions of long-term interest orientation,while the transparency of corporate governance information disclosure including shortterm interest orientation will reduce the cost of corporate debt financing.Secondly,economic policy uncertainty will be included in the scope of short-term risk consideration of banks,while ESG information disclosure transparency alleviates creditors’ concerns about the risk impact of non-financial factors,which is reflected in the fact that economic policy uncertainty weakens the positive relationship between ESG information disclosure transparency and debt financing cost.Further,heterogeneity analysis shows that in small and medium-sized,private,short-term debt structure dominated,highly competitive and heavily polluting industries,ESG information disclosure transparency has a stronger positive effect on debt financing cost.Further exploration on how to make up for the debt financing limitations of ESG information disclosure finds that with the improvement of accounting conservatism,the enhancement of regional fintech and digital inclusive finance,and the increase of media coverage,banks’ concerns about the short-term solvency of companies have been alleviated,which is reflected in the significantly weakened positive relationship between ESG information disclosure transparency and debt financing costs.Mechanism analysis shows that ESG information disclosure transparency increases corporate debt financing costs by increasing short-term debt repayment risk and reducing short-term operating performance.(3)The transparency of ESG information disclosure will reduce the overall financing constraints of the company.First of all,the transparency of ESG information disclosure can alleviate corporate financing constraints,which is mainly reflected in the dimensions of environment and corporate governance,while the impact of the social responsibility dimension is not obvious.Secondly,economic policy uncertainty will play the role of ESG reputation insurance,which is reflected in the negative relationship between the enhancement of ESG information disclosure transparency and the overall financial constraints of the company.Further,heterogeneity analysis finds that the inhibitory effect of ESG information disclosure transparency on financial constraints is stronger in private companies,highly competitive industries,heavily polluting industries,and low marketization regions.Mechanism analysis shows that ESG information disclosure transparency reduces the overall level of corporate financing constraints through three paths: reducing information asymmetry,reducing agency cost,and expanding informal financing channels.this paper mainly makes the following four research contributions:Firstly,this paper enriches the research on the influencing factors of corporate financing cost from the perspective of non-financial information disclosure.At present,the research on the influencing factors of corporate financing cost from the perspective of information disclosure mainly focuses on the impact of financial information on corporate financing cost,but pays insufficient attention to non-financial information,and mainly focuses on the field of corporate social responsibility,and there are many controversies in the research conclusions.Different from corporate social responsibility driven by government regulation,which belongs to the "profit and loss" category,capital-driven ESG belongs to the "asset" category on the balance sheet.There is an essential difference between the two.This study explores the different impacts of ESG and its three dimensions of information disclosure transparency on corporate financing costs,which not only overcomes the limitation of the previous literature only focusing on the single dimension of non-financial information but also enriches the literature on the influencing factors of corporate financing costs.Second,it not only expands the economic consequences of the ESG field from the perspective of corporate financing behavior decision-making but also enriches the existing ESG research from the perspective of information disclosure.The existing literature on the economic consequences of ESG mainly focuses on developed countries.Moreover,most of the existing literature focuses on ESG performance from the "quality" perspective but pays insufficient attention to the transparency of ESG information disclosure from the "quantity" perspective.In addition,the research on the economic consequences of ESG often difficult to avoid the troubles of endogenous problems such as mutual causality.Thirdly,based on different types of financing costs,this paper explores the "two sides" of the economic consequences of ESG information disclosure,which provides empirical evidence for resolving the dispute between non-financial information disclosure and financing costs.There is heterogeneity in the interest demands of different types of investors.This study innovates that ESG information disclosure mainly caters to the preferences of shareholders rather than creditors,which has a "double-edged sword" effect on corporate financing costs and is of great significance to promoting the transformation of corporate financing structure and achieving highquality development.Fourthly,the introduction of macro environment uncertainty expands the effect boundary of non-financial information on corporate financing costs and enriches the theoretical research on the "insurance-like" effect of ESG.As an important external situation,the previous literature mainly discusses the main effect of economic consequences,ignoring the objective fact that changes in the external macro environment cannot be artificially intervened,that is,managers can only seek benefits and avoid disadvantages of this exogenous shock.Based on this,this study further introduces economic policy uncertainty as a moderating variable based on the relationship between ESG information disclosure transparency and corporate financing cost,which is conducive to discovering the role boundary of ESG playing an "insurance-like" effect and also enriches the existing research literature on economic policy uncertainty.Finally,this study proposes the following three research implications:First,on the one hand,listed companies should strive to improve the transparency of ESG information disclosure,play an important role in alleviating external financing constraints,and fully realize that ESG information disclosure is an endogenous demand for the long-term sustainable development of enterprises rather than an externally imposed burden.On the other hand,we should accelerate the transformation of the financing structure,gradually get rid of the dependence on debt financing,increase the proportion of equity financing,maximize the utility of ESG information disclosure in reducing external financing costs,enhance the ability of finance to support the real economy,and inject new momentum for enterprises to solve financing problems and achieve high-quality transformation and development.Second,for external investors,on one hand,shareholders should strengthen the ESG value investment concept,and avoid the "thunderstorm" risk caused by nonfinancial factors in the capital market by supporting high-quality enterprises with sustainable development,to obtain long-term and stable returns.On the other hand,bank creditors should establish a sense of long-term,incorporate ESG risks into the risk evaluation system of financial institutions,establish long-term cooperative lending relations with enterprises,and finally achieve the goal of a "win-win" for creditors and enterprises,transform to a green bank and a responsible bank,and avoid falling into the trap of all-out fishing and short-sightedness.Third,on the one hand,government regulatory departments should actively promote the construction of an ESG information disclosure system,increase the overall ESG information disclosure ratio of Chinese listed companies,and achieve the "triple dividend" of economic growth,environmental protection,and social equity.On the other hand,we should guide financial resources and support policies to favor green development industries,optimize the efficiency of resource allocation,and provide a guarantee for promoting China’s economic development mode from resourceconsuming to sustainable development.