A Study On The Impact Of ESG Performance Of Family Enterprises On Investment,Financing,and Corporate Performance

ESG is an abbreviation for Environmental,Social,and Governance.Corporate ESG performance refers to the awareness and performance level of an enterprise in implementing ESG concepts,reflecting or improving ecological environmental protection,social responsibility,and corporate governance in investment decision-making and production and operation processes.Whether the ESG performance of enterprises can promote and help enterprises make scientific investment and financing decisions,reduce their financing costs,improve their investment efficiency,and thus affect their performance is an urgent issue for listed companies,and it is also an issue that needs to be further studied by the academic community.The current research on ESG mainly focuses on the factors that affect ESG,the economic consequences of ESG,how to promote more enterprises to participate in ESG,and how to improve the quality of ESG disclosure.The research on the economic consequences of ESG mainly focuses on its impact on stock returns,corporate performance,corporate innovation,and capital costs.Regarding ESG research,existing research has focused mainly on the integrity of enterprises,without distinguishing between different types of enterprises.In China,85.4% of private enterprises are family businesses,which have made outstanding contributions to creating wealth,creating employment opportunities,and improving competitiveness.Family businesses create 75% of employment opportunities and contribute more than 50% of GDP.Family business is an important component of the overall strength of Chinese enterprises.At present,the issue of enterprise ESG is receiving increasing attention from the academic community.Although thesis on ESG as a whole continue to emerge,there is relatively little research literature on ESG in family businesses,a specific type of business.In view of this,this thesis takes the family business as the research perspective,selects the data of A-share listed family businesses from 2009 to 2021,and explores the impact of family business ESG on investment and financing.Firstly,based on the research literature on family businesses,ESG,financing costs,investment efficiency,and corporate performance,the relevant theories of ESG research are determined.Although there is no universally accepted theory to explain ESG,the research on ESG literature mainly relies on principal-agent theory,legitimacy theory,stakeholder theory,and sustainable development theory.Based on existing research,define the connotation of family business,ESG,financing cost,investment efficiency,and enterprise performance,determine the research scope of ESG performance of family business and enterprise investment and financing,and then construct a theoretical analysis framework of ESG performance of family business on enterprise investment and financing.Secondly,collect data related to family businesses manually,and collect data required for empirical research through CSMAR database,CNRDS database,WIND database,Baidu,corporate financial statements,cninfo,and other channels.Finally,using STATA14 to analyze the data,verify the models and assumptions proposed in this thesis.Through theoretical discussion and empirical analysis,this thesis draws the following conclusions:First,ESG performance of family businesses can reduce the financing costs of enterprises.The internationalization of family businesses can strengthen the impact of ESG performance on debt financing costs.Adverse events can also strengthen the reduction effect of ESG performance on financing costs.The analysis of intermediary mechanisms shows that the ESG strategy of family businesses can reduce information asymmetry,improve legitimacy,reduce business risks,and help family businesses obtain government subsidies and tax incentives.Further analysis shows that among the three dimensions of ESG,social dimension(S)and corporate governance dimension(G)can reduce debt financing costs,while environmental dimension(E)has no significant impact on financing costs;In family businesses with star executives,ESG performance has no significant impact on financing costs,while in family businesses without star executives,ESG performance can significantly reduce the cost of debt financing,supporting the "overconfidence" hypothesis.The study found that the impact of ESG performance on debt financing costs is negative and significant at the owner management stage,the child development stage,and the power transfer stage,while the impact of ESG performance on debt financing costs is not significant at the paternity partnership stage and the family exit stage;The age of the family leader has a moderating effect on ESG debt financing costs,and the age of the family leader will strengthen the reduction of ESG performance on debt financing costs.In summary,the relationship between ESG performance and debt financing costs indicates that ESG actions by family businesses are a decisive strategy for risk management for family businesses.Secondly,the performance of ESG in family businesses can promote investment efficiency.Advertising intensity can positively regulate the relationship between ESG and investment efficiency.Research on intermediary mechanisms has shown that family business ESG reduces information asymmetry,alleviates financing constraints,and reduces the second type of agency problems,thereby increasing the investment efficiency of enterprises.Further analysis shows that among the three dimensions of ESG,environmental dimension(E)and social dimension(S)can significantly increase investment efficiency,while corporate governance dimension(G)has no significant impact on investment efficiency;Family business ESG can reduce overinvestment and improve underinvestment;ESG performance can significantly and positively affect investment efficiency when the enterprise is in the stage of owner management and power transfer,while ESG performance has no significant impact on investment efficiency when the enterprise is in the stage of child cultivation and development,parent-child partnership,and family exit;ESG performance can reduce inefficient investment when the actual controller is the CEO himself or when the family member of the actual controller is the CEO.However,in family enterprises where the non family member is the CEO,ESG performance does not significantly affect investment efficiency.In summary,the positive relationship between ESG performance and investment efficiency indicates that ESG actions by family businesses are a decisive strategy for creating competitive advantages for family businesses.Thirdly,the ESG performance of family businesses can improve business performance.Internal control quality can strengthen the increasing effect of ESG performance on corporate performance,and strategic change can also strengthen the increasing effect of ESG performance on corporate performance.ESG performance of family businesses can improve corporate performance by reducing debt Financing costs and improving investment efficiency.Further analysis shows that the environmental dimension(E),social dimension(S),and corporate governance dimension(G)of the three dimensions of ESG can significantly improve corporate performance;In equity controlled family businesses,the impact of ESG performance on business performance is not significant.In strategic controlled family businesses,the impact of ESG performance on business performance is significant at the 10% significance level,while in fully controlled family businesses,the impact of ESG performance on business performance is significant at the 1% significance level;The political affiliation of actual controllers can negatively regulate the impact of ESG performance on corporate performance;The impact of ESG performance on corporate performance is significant during the family’s ongoing operation phase,but not significant during the family’s exit phase.In summary,the positive relationship between ESG performance and corporate performance indicates that the ESG performance of family businesses can promote the improvement of corporate performance by reducing financing costs and improving investment efficiency.ESG actions of family businesses are a decisive strategy to help family businesses achieve "long-term growth".The empirical results of this thesis indicate that ESG performance of family businesses can reduce financing costs,improve investment efficiency,and thereby improve corporate performance.The ESG performance of family businesses can help companies achieve sustainable development,and stakeholders can give ESG a positive response.Based on this,this thesis proposes the following policy recommendations.(1)Family businesses should actively implement the ESG concept and improve ESG performanceFrom the empirical results of this thesis,it can be seen that the ESG performance of family businesses can reduce their financing costs,improve their investment efficiency,and thereby improve their performance.The economic goals and non economic goals of family businesses are not inconsistent.When family businesses actively implement ESG strategies,stakeholders can effectively evaluate relevant information,and family businesses can achieve positive interaction with internal and external stakeholders,Family businesses should actively improve ESG performance.(2)Family businesses should implement ESG strategies that have both commercial and social valueOnly in this way should enterprises conduct ESG activities that generate both social and commercial value can they achieve win-win results and form a long-term mechanism.Moreover,enterprises need to leverage their resource advantages to conduct ESG.Family businesses should consider the three priorities of ESG based on their own resource endowments,and rationally determine the allocation of resources(personnel,funds,time,etc.).They also need to seek a balance between the costs and benefits of measures.(3)Financial institutions should actively assist the ESG of family businessesBanks should restrict the investment of loans to enterprises with high environmental and carbon emissions,invest loans in family enterprises with good ESG performance,or take ESG factors into account when granting loans to enterprises,and reduce the bank loan threshold and bank loan costs for family enterprises and projects with good ESG performance.Asset management institutions that manage a large amount of funds,especially social security and pension funds,can invest in listed family companies that meet ESG requirements.The importance of market capital will drive family companies to improve their ESG performance.(4)The government should increase incentives for enterprises to practice the ESG conceptThe implementation of ESG concepts by enterprises not only depends on their conscious compliance,but also relies on effective incentives from the external environment.Government subsidies and tax incentives can provide more incentives for family businesses to actively engage in ESG.The government can encourage family companies through government subsidies,tax incentives,and other means,such as formulating one-time awards,special funds,and tax incentives for ESG projects with good performance,so that listed family companies can obtain tangible benefits from improving ESG performance and enhance the importance of ESG.(5)Improve the legal environment for sustainable development and strengthen effective supervision of enterprise complianceRelying on market mechanisms to form the ESG awareness of family businesses takes too long and is costly,so government regulation is needed.Judging from the current situation,the regulatory mechanism of ESG mainly relies on a "top down" approach,which means that ESG regulators formulate corresponding policies and rules to compel investors and enterprises to disclose more ESG information,improve ESG performance,and reduce the substantive negative impact of ESG risks on enterprises through mandatory or voluntary forms.Therefore,the government can formulate stricter ESG regulatory requirements,use appropriate laws and regulations to bridge the weaknesses of the market mechanism,and institutionally build a good environment suitable for enterprises to develop ESG.The academic contributions and innovations of this thesis are mainly reflected in the following: First,from the perspective of family businesses,this thesis explores the economic consequences of ESG performance in family businesses,supplementing the relevant research on ESG and family businesses.Secondly,it explores the mechanism and specific forms of family business ESG performance improving investment efficiency,financing costs,and corporate performance.This thesis not only explores the mechanism by which ESG performance of family businesses improves investment efficiency,financing costs,and corporate performance,but also divides ESG performance of family businesses into E,S,and G dimensions,in-depth analyzing the specific manifestations of ESG performance affecting investment efficiency,financing costs,and corporate performance.Thirdly,it explores the heterogeneous impact of the unique factors of family businesses on the economic consequences of ESG.This thesis selects the heterogeneous effects of internal factors such as family life cycle and heterogeneity of family control on the economic consequences of ESG in family enterprises,which not only helps the outside world deepen their understanding of ESG behavior in family enterprises,but also helps the owners and managers of family enterprises choose appropriate ESG methods based on the different situations of family enterprises,thereby enhancing enterprise value.