Does ESG information disclosure increase firm value? The mediation role of financing constraints in China

This study examined the influence of environmental, social, and governance (ESG) information disclosure on firm value and the mediation effect of financing constraints using a panel of Chinese A-listed firms from 2013 to 2020. Based on linear regressions, we found that the relationship between ESG disclosure scores and firm value was significantly positive, and the results remained after robustness checks and endogenous tests. Furthermore, the mediation effect analysis indicates that the relationship is achieved by alleviating financing constraints. The subsample analyses showed that ESG disclosure scores positively affect firm value in non-state-owned, nonheavy polluting, and high-transparency firms. The results of each dimension’s relationship to firm value indicate that environmental and social dimensions significantly affected firm value in the panel data, whereas governance did not. Therefore, this paper determines the influence of ESG information disclosure and firm value in China and reveals the mediation effect of financing constraints, supplementing the influence mechanism of information disclosure and extending the previous studies bsed on the developed stock markets. • The ESG information disclosure of Chinese listed enterprises can significantly increase firm value. • The mediation effect shows that ESG information disclosure can enhance firm value by mitigating financing constraints. • ESG disclosure score has a greater impact on firm value for non-state-owned, nonheavy polluting, and high-transparency firms. • All sub-dimensions of ESG information disclosure (E, S, and G) have a significantly positive impact on firm value.