THE IMPACT OF ESG ON INNOVATION, MEDIATED BY THE COST OF DEBT FINANCING
Journal: Advanced Management Science (AMS)
Author: Zhenna Huang, Yuchen Ni, Jiayu Hu
This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
In recent years, environmental, social, and governance (ESG) has become a very prominent issue. This study investigates how the cost of debt financing acts as a mediator between the impact of ESG and innovation, using a sample of A-share listed businesses from 2011 to 2021. It has been discovered that companies that complete their ESG responsibilities can advance their technological innovation. Numerous robustness tests later, the conclusion remains valid. Mechanistic research indicates that a company’s ability to fulfil its ESG responsibilities can reduce the cost of debt financing, which encourages technological innovation. The fulfilment of ESG responsibilities plays a more significant role in promoting technological innovation in organisations with executives in older age. The subgroup test reveals that non-state-owned businesses, non-manufacturing industries, and businesses with a high level of industry rivalry have greater benefits from the promotion of ESG on technical innovation. This paper offers a framework for decision-making that enables businesses to meet their ESG obligations. It also offers useful recommendations for the sustainable growth of businesses.