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Environmental, social,
governance disclosure and
corporate sustainable growth:
Evidence from China
Nannan Wang
1
*, Dayao Li
2
,
3
*, Dengfeng Cui
1
and Xiaolong Ma
4
1
School of Economics and Management, Shihezi University, Shihezi, China,
2
Beibu Gulf University,
Qinzhou, China,
3
Qinzhou Structural Health Monitoring Engineering Technology Research Center,
Qinzhou, China,
4
Zhengzhou University of Industry Technology, Zhengzhou, China
The ultimate goal of business development is to achieve sustainable corporate
growth and maximize shareholder wealth. Whether and how ESG disclosure
affects sustainable growth needs to be further explored. Combining stakeholder
theory and signaling theory, a panel data test based on 300 listed companies in
Shanghai and Shenzhen in China finds that ESG disclosure can positively
promote sustainable growth compared with companies that do not disclose
ESG disclosure, and the higher the level of ESG disclosure, the greater the
promotion effect on sustainable growth; and ESG disclosure further enhances
sustainable growth by reducing financing constraints and enhancing human
capital. In addition, the positive relationship between ESG disclosure and
corporate sustainable growth is particularly pronounced for non-
environmentally sensitive industries and when external environmental
uncertainty intensifies. Our findings enrich the research related to ESG
disclosure, provide motivation to motivate firms to consciously practice ESG
disclosure from a sustainable growth perspective, and contribute to a more
detailed understanding of the mechanisms of ESG disclosure and sustainable
corporate growth.
KEYWORDS
ESG disclosure, corporate sustainable growth, financing constraints, human capital,
environmentally sensitive industries
Introduction
In recent years, with the introduction of the United Nations “2030 Sustainable
Development Goals”, the concept of responsible investment, which implements
environmental, social and governance principles, has been gaining popularity. ESG is
an acronym for Environment, Social and Governance, an investment concept and
corporate evaluation standard that focuses on the environmental, social and
governance performance of companies rather than financial performance. Investors
can assess the contribution of companies in promoting sustainable economic
development and fulfilling social responsibility by observing corporate ESG. Among
them: Environment (E) focuses on the impact of enterprise operation and investment
OPEN ACCESS
EDITED BY
Xiaodong Yang,
Xinjiang University, China
REVIEWED BY
Cunyi Yang,
Sun Yat-sen University, China
Shikuan Zhao,
Chongqing University, China
Jinning Zhang,
Shandong University, China
*CORRESPONDENCE
Nannan Wang,
wangnn@stu.shzu.edu.cn
Dayao Li,
ldy@bbgu.edu.cn
SPECIALTY SECTION
This article was submitted to
Environmental Economics and
Management,
a section of the journal
Frontiers in Environmental Science
RECEIVED 11 August 2022
ACCEPTED 15 September 2022
PUBLISHED 03 October 2022
CITATION
Wang N, Li D, Cui D and Ma X (2022),
Environmental, social, governance
disclosure and corporate sustainable
growth: Evidence from China.
Front. Environ. Sci. 10:1015764.
doi: 10.3389/fenvs.2022.1015764
COPYRIGHT
© 2022 Wang, Li, Cui and Ma. This is an
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Frontiers in Environmental Science frontiersin.org01
TYPE Hypothesis and Theory
PUBLISHED 03 October 2022
DOI 10.3389/fenvs.2022.1015764
activities on the environment, such as resource utilization and
pollutant emission. Social (S) focuses on the relationship between
the company, focuses on the coordination and balance between
the company and its stakeholders. Governance (G) focuses on the
internal governance structure and governance rules of the
company (Duuren et al., 2016;Liu et al., 2022). ESG
investment is highly compatible with China’s goal of green
and low-carbon transformation and is a powerful tool to
promote low-carbon transformation and sustainable
development of enterprises. Therefore, studying the
relationship between ESG disclosure and sustainable corporate
growth is the basis for implementing the development of ESG
concept. Based on the current background of significantly
increased environmental uncertainty, combined with the
importance and inevitability of ESG development in China,
the study of ESG disclosure is of great practical significance
(Li et al., 2022;Zhang et al., 2022).
Compared with the ESG development process in foreign
countries and Hong Kong, China, ESG construction in mainland
China is relatively backward and still in the initial stage of
development, mainly because mainland China adopts the
voluntary principle for ESG report disclosure, while the Hong
Kong Stock Exchange follows mandatory disclosure
requirements (Luo et al., 2022). In recent years, stock
exchanges and the Securities and Futures Commission have
also made further regulations on corporate environmental,
social as well as governance disclosure and proposed a core
index system for measuring ESG performance of listed
companies to further promote the development of ESG in
China. According to the White Paper on ESG Development of
Chinese Listed Companies (2021), a total of 1092 A-share listed
companies in China have issued ESG reports for 2020 (Chen,
2021). Compared with the ESG disclosure of listed companies in
Europe and the US, which has exceeded 60% in the same period,
the number of companies issuing ESG disclosure reports in
China only accounts for 25.3% of the number of all A-share
listed companies, which It is significantly behind the European
and American countries. This indicates that the ESG concept of
some listed companies in China has been gradually improved,
but the overall level is not yet high. How to stimulate the
autonomy of corporate ESG disclosure and provide
endogenous motivation for corporate ESG disclosure is an
urgent issue to be solved at present.
Studies have been conducted to explore the basic logic of
information disclosure from the perspective of the results
brought by ESG disclosure, and there are mainly two views
on the spillover and loss effects of ESG disclosure; 1) ESG
disclosure strengthens links with stakeholders and brings
spillover effects. Based on stakeholder theory, on the one
hand, ESG disclosure conveys more information about
corporate attributes to external investors, and timely
disclosure of environmental information by enterprises will
gain government support, public recognition, and good
competitiveness among peers, help investors understand
corporate operations and sustainable development, reduce
information asymmetry between insiders and external
investors, and lay the foundation for sustainable growth of
enterprises (Lins et al., 2017;Xie et al., 2019). On the other
hand, ESG disclosure strengthens consumers’understanding of
the company and enhances customer stickiness, thus improving
corporate performance (Clemons et al., 2017;Lin et al., 2015).
Furthermore, actively practicing ESG and timely disclosure will
attract excellent employees, enhance corporate social influence,
and improve corporate reputation (Broadstock et al., 2020;Su
et al., 2021). 2) ESG disclosure is also accompanied by certain
risks and costs, which bring loss effects. In a competitive market,
information disclosure may lead to leakage of core technologies,
and competitors may make appropriate strategies to take
advantage of the company’s competitive advantage based on
the information obtained, resulting in damage to corporate value
(Xi, 2010); Not only that, but despite the increasing use of
environmental, social and governance (ESG) ratings, It can
also have a negative impact. Christensen et al. (2022)
conclude that ESG disclosures often exacerbate the divergence
in ESG ratings. In addition, information disclosure may also
intensify the “irrational”behavior of managers and lower
monitoring costs lead to a higher likelihood of overregulation
by shareholders (Hahn and Kühnen, 2013), while managers may
engage in activities that reduce corporate value in order to
demonstrate their capabilities and take away corporate
resources for their private benefit, resulting in the destruction
of the trust relationship between managers and shareholders and
the reluctance of shareholders to invest in high cost innovation
activities, which ultimately has a negative impact on sustainable
corporate growth (Hermalin and Weisbach, 2012).
The above studies have deepened the consequences of ESG
disclosure, but there is no consistent conclusion on the impact of
ESG disclosure on business operations, and the question of
whether there is spillover effect or loss effect of ESG
disclosure needs to be further explored. China is still in the
early stages of ESG development, and investors and firms do not
yet have a clear understanding of the specific effects of ESG
activities on corporate performance and the mechanisms of their
interactions. Therefore, it is of practical value to provide
endogenous motivation for companies to actively invest in
ESG by studying the sustainable growth consequences of ESG
disclosure (Wu et al., 2021;Zhao et al., 2022). Based on the above
analysis, this paper takes China, a representative emerging
market country, as an example to study the impact of ESG
disclosure on sustainable corporate growth and its intrinsic
impact mechanism; on this basis, it further explores the
differences in its impact under different industry types and
external environments. The contribution and significance of
this study are mainly reflected in the following four aspects.
First, socially responsible investment as an important
implementation tool for sustainable development, scholars
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Wang et al. 10.3389/fenvs.2022.1015764
have explored the impact of responsible investment on corporate
business activities from different perspectives, but no study has
explored the impact of ESG disclosure from the perspective of
sustainable growth, and this study innovatively explores the
impact of ESG disclosure on corporate sustainable growth.
Second, current findings on the impact of ESG disclosure are
inconsistent. This paper examines the effect of ESG disclosure on
corporate sustainable growth based on a cross-period perspective
combined with a double difference approach (DID), and the
findings further support the incentive effect of ESG disclosure
and provide empirical evidence for the positive effect of ESG
disclosure. Third, further analysis yields the mechanisms of the
role of financing constraints and human capital in ESG disclosure
to influence the sustainable growth of firms to play, and explores
the effects of external environmental uncertainty and industry
heterogeneity in order to more clearly understand the intrinsic
mechanisms and external conditions of ESG disclosure to
influence sustainable growth of firms. Fourth, this study also
has some practical value, and the findings provide empirical
evidence for enterprises to actively disclose ESG information and
improve ESG performance to enhance corporate sustainable
growth, and provide new ideas to promote enterprises to
practice the concept of green development and achieve high-
quality development.
Institutional background and
hypothesis development
The institutional background of ESG
disclosure in China
Globally, ESG disclosure is mainly divided into mandatory
disclosure and voluntary disclosure (He et al., 2019). Mandatory
disclosure requirements make companies improve their
environmental, social responsibility and corporate governance
to provide a good environment for socioeconomic development
(Jannis and Hloger, 2013). In terms of global sustainability
reporting tools, about two-thirds are mandatory disclosure
tools and about one-third are voluntary disclosure tools. The
reason for the low disclosure of ESG information for listed
companies in China at present may be that regulators have
not yet introduced mandatory ESG disclosure for all listed
companies, and the specific requirements for environmental,
social and governance dimensions are not uniform. For the
environmental level, the CSRC revised the content and format
of semi-annual and annual reports in 2017 and introduced a
mandatory environmental information disclosure system for
some listed companies. For the governance level, it revised the
Code on Governance of Listed Companies in 2018 and revised
the format and guidelines for periodic reports of listed companies
again in 2021 to further improve the relevant requirements;
however, the environmental information mandatory disclosure
requirements still do not cover all listed companies, and there is
no unified disclosure framework and rules; there is no mandatory
disclosure at the social and governance levels; and the overall
disclosure framework of ESG still needs to be improved (Tsang
et al., 2021). As of 15 April 2022, China Securities Regulatory
Commission issued the “Guidelines on Investor Relations
Management for Listed Companies (2022)", which includes
“ESG information”for the first time in the communication
content of investor relations management. The next step is for
the Chinese government and regulators to further improve
relevant laws and regulations, strengthen the mandatory
disclosure of environmental and climate information, actively
learn from international disclosure experience, and promote the
formation of easy to understand, applicable and comparable
information disclosure guidelines or standards.
Literature reviews and hypothesis
development
With the advancement of digital technology, the
dissemination of Internet information is more effective in
playing the role of ESG disclosure, urging companies to
improve energy production efficiency and reduce energy
consumption in order to achieve green and sustainable
development (Hao et al., 2022;Ren et al., 2022). The ESG
disclosure system is an important basic system for the capital
market to implement the goals of carbon peaking and carbon
neutrality. Currently, most ESG reports of Chinese A-share listed
companies are voluntary disclosures, and a small number of
constituent companies have social responsibility reporting
requirements. Driven by policies and the market, ESG
disclosure by Chinese listed. However, from an overall
perspective, the quantity of ESG information disclosure by
listed companies has increased, but the quality varies widely
and is uneven. The quality of ESG disclosure varies widely and
unevenly. Therefore, in order to solve the worries of ESG
investment, we should pay attention to whether ESG
disclosure can bring sustainable growth of enterprises under
the complex and changing external environment and the
continuous impact of the COVID-19 (Tampakoudis and
Anagnostopoulou, 2020).
From the existing studies on the enhancing effect of ESG on
business performance (Friede et al., 2015;Hakan and Peng,
2021), it can be hypothesized that ESG disclosure helps to
promote sustainable corporate growth. In terms of the direct
impact effect, ESG reporting serves as a commitment tool to
constrain firms to adopt ethical behavior (Barkó et al., 2021), and
this ethical behavior serves as an insurance policy that the share
price of a firm will fall less even when it is involved in a related
scandal (Godfrey, 2005); In addition, ESG disclosure can bring
about increased information transparency, which helps
stakeholders to better understand the operations and future
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development of the firm, reducing adverse selection risk (Kaiser
and Welters, 2019;Lagasio and Cucari, 2019) and improving
corporate performance (Brooks and Oikonomou, 2017). In terms
of indirect effects, ESG disclosure can exert a signaling effect that
helps firms obtain support from the government, bondholders,
and investors, and helps broaden corporate financing channels
and reduce corporate financing constraints (Hamrouni et al.,
2020;Jia et al., 2021). Secondly, ESG disclosure as a response to
stakeholder expectations (Ma et al., 2022) and is beneficial for
firms to gain the recognition of key stakeholders, which can
create a good working atmosphere for internal employees, thus
attracting and retaining talented employees, who can make more
valuable contributions to the development of the firm when they
are more volved in business decisions (Turban and Greening,
1997;Mao and Weathers, 2019). Overall, ESG disclosure creates
a socially responsible image for companies in order to enhance
their responsiveness in the face of crises, and in the current
context of heightened external environmental sexual uncertainty,
this responsiveness is an important guarantee for sustainable
corporate growth, the improvement of corporate performance is
an important manifestation of sustainable growth, the reduction
of financing constraints is a key aspect of sustainable corporate
growth, and the participation of knowledge employees is the
basic support for sustainable growth (Hong et al., 2022). In
summary, the research hypothesis can be formulated as follows.
H1a: ESG disclosure promotes sustainable growth by reducing
corporate financing constraints and enhancing corporate human
resource reserves.
Of course, every coin has two sides, and ESG disclosures can also
inhibit sustainable growth by increasing dedicated costs, creating the
impression of “greenwashing”and increasing operating costs. First, for
information users, if they use the information disclosed by the firm
strategically, it may have a negative effect on the business performance
of the firm, which is usually referred to as “Proprietary Cost”because
the information disclosed by the firm will be observed and used by
competitors, thus reducing the firm’s competitive advantage and
having a negative effect on the sustainable growth of the firm
(Darrough, 1993). Second, Brammer et al. (2006) argue that the main
purpose of corporate disclosure is to gain the trust of stakeholders
rather than a genuine desire to contribute to society. Not only that,
when companies intentionally disclose information on environmental
and social responsibility, it also leads to questions about the
completeness and reliability of the company’s disclosure (Simnett
and VanstaelenChua, 2009;Moser and Martin, 2012), thus ESG
disclosure can create the impression of “greenwashing”; In the long
run, “greenwashing”behaviors adopt inconsistent management
practices, which can eliminate companies from long-term value
competition. In particular, once the “greenwashing”behavior is
exposed, the capital market will react the most quickly, the stock
price will fall, and the enterprise value will be damaged (Li et al.,
2022); at the same time, as the government environmental
protection departments and community organizations continue to
strengthen supervision, it will force the enterprise management to
pay for the “greenwashing”behavior. The social trust crisis caused
by the exposure will also increase the management risk, which is not
conducive to the sustainable development of enterprises (Yang et al.,
2021). Third, ESG disclosure is a complex and systematic effort that
requires capital and personnel to measure, collect, and report relevant
information (Cormier and Magnan, 1999), which is necessarily costly
and the disclosure effort distracts managers from the core business of
the firm, thus negatively impacting sustainable growth. In summary, the
research hypothesis is proposed.
H1b: ESG disclosures inhibit sustainable growth by increasing costs,
creating “greenwash”perception, and distracting managers.
Model and data
Data source and samples
Starting from the above analysis, this paper investigates the
impact of ESG disclosure on corporate sustainable growth using a
sample of 300share listed companies in Shanghai and Shenzhen
from 2015-2019. The CSI 300 Index is an index of 300 stocks that
reflects the comprehensive movement of A-share prices, which
was jointly released by the Shanghai and Shenzhen stock
exchanges on 8 April 2005. In order to facilitate the tracking
and portfolio of investors, the index also has a certain degree of
stability and operability, and is characterized by high liquidity
and large size. The specific sample selection process is as follows:
1) excluding listed companies such as finance and insurance,
which are significantly different from other listed companies in
China in terms of main business, company size, and information
disclosure;2) excluding (*) ST listed companies, which are
significantly different from other companies in terms of
financial indicators and information disclosure.3) excluding
companies listed in the current year, because the companies
listed in the current year have been listed for a shorter period of
time and have a shorter duration of historical information, so
there are large differences between them and other companies in
terms of information disclosure. To mitigate the impact of
extreme values on the empirical results, this paper uses
winsor2 to shrink the tails at the 1% level above and below
the continuous variables. The ESG data are obtained from the
SynTao ESG rating index, and since the database has been
published since 2015 and the available data are available until
2019, the time span is 2015-2019, and all other data are from the
CSMAR database.
Research model
To verify the impact of ESG disclosure on corporate
sustainable growth, model 1) is constructed for empirical
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testing, drawing on Ruan and Liu (2021) study, in order to
weaken the endogeneity problem arising from reverse causality,
lagged one-period values are used for both independent and
control variables Among them, i and t represent the firm and
year, respectively; SGR is the explanatory variable sustainable
corporate growth; ESG is the core explanatory variable rating of
corporate environmental, social and governance disclosure;
controls represent the firm control variables; Industry is the
industry dummy variable and Year is the year dummy variable; ε
is the residual term of the model, which contains other factors
outside the model variables that affect the sustainable growth of
the firm. Specifically set up the following model:
SGRit+1β0+β1*ESGit +β2*Controlsit +ΣIndustry +ΣYear
+ε
(1)
Variables
Dependent variable: Sustainable Growth Rate(SGR),
Calculating SGR of firm according to Higgins (1977)
sustainable growth model, SGR = net sales margin*total
asset turnover*equity multiplier*retained earnings ratio.
The sustainable growth rate used in the robustness test is
calculated according to Van Horne (1988) sustainable growth
models SGR = net sales margin*earnings retention rate* (1 +
equity ratio)/(1/total asset turnover net sales margin*earnings
retention rate × (1 + equity ratio)). The Higgins sustainable
growth model, although only a static model, is more applicable
to calculate the sustainable growth rate of Chinese listed
companies; the Van Horne sustainable growth model is
further subdivided into static and dynamic in its
calculation. The Higgins and Van Horne models share the
same theoretical logic and both use the maximum growth rate
ofsalesasthesustainablegrowth rate. Both of them are
influential and representative dynamic models for
measuring the sustainability of companies so far.
Independent variable: ESG disclosure (ESG), The ESG data
are obtained from the SynTao Green Finance ESG rating index
(Ruan and Liu, 2021), There are 10 grades of D, C, C, C+, B, B,
B+, A, A, A+, and they are assigned a value of 1–10 in this way.
The SynTao Green Finance ESG rating index has developed an
effective ESG assessment method specifically for China,
combining global ESG standards and Chinese market
characteristics, and has accumulated a large amount of data.
The ESG rating system consists of three levels of indicators: Level
1 indicators are environmental, social and corporate governance
dimensions; Level 2 indicators are 13 categorized issues under
environmental, social and corporate governance; Level
3 indicators cover specific ESG indicators. There are
127 three-level indicators. The ESG rating is weighted
according to industry characteristics, and industry-specific
indicators are assigned to each industry in order to better
grasp the characteristics of different industries. The ESG
ratings used in the robustness test were obtained from the
HuaZheng database, and the nine ratings from C to AAA
were assigned from 1 to 9, while the mean value of each
quarterly rating was taken to measure the annual ESG disclosure.
Control variables: Drawing on the studies of existing
scholars, the balance sheet ratio (Lev), cash flow ratio (Cf),
profitability (Roa), firm size (Size), nature of ownership (Soe),
and degree of separation of powers (SP), were selected as control
variables in a comprehensive manner, and the detailed variable
definitions and measures are shown in Table 1.
Descriptive statistic
Table 2 shows the results of the descriptive statistical analysis of
the dependent, independent and control variables. The mean value
of ESG is 3.468, the minimum and maximum values are 1 and 8,
respectively, and the standard deviation is 2.521, indicating that the
ESG ratings of the companies in the sample differ significantly and
the level of ESG disclosure needs to be improved. The mean value of
SGR is 0.0399, and the minimum and maximum values are
0.0308 and 0.1568, respectively, which are similar to existing
TABLE 1 Variable definition and description.
Variable type Variable name Code Calculation method
Dependent variable Sustainable Growth Rate SGR net sales margin*total asset turnover*equity multiplier*retained earnings ratio*100%
Independent variable ESG disclosure ESG There are 10 grades of D, C, C, C+, B, B, B+, A, A, A+, and they are assigned a value of 1–10 in this way
Control variables Financial leverage Lev Total liabilities/ Total Assets
Cash flow Ratio Cf Cash flow/ Total Assets
Profitability Roa Net Profit/Total Assets
Company Size Size Log (1 + Size)
Ownership Soe stateowned enterprises assigned a value of 1, otherwise 0
Separation of powers SP The difference between control and ownership of a company
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studies (Luo et al., 2022), indicating that there is great variability in
the sustainability level of the sample companies; Individual
differences were also observed in the sample for the main control
variables, and the distribution of the control variable values were
within a reasonable range. Overall, the sample was well
differentiated.
Results
Tests for differences in means and
medians of variables in the ESG rating
subgroup sample
Since the measurement of ESG disclosure takes positive
integers within 1-10 for assignment, ESG disclosure is a
discrete variable, so in order to avoid errors caused by
discrete variables and to initially explore the trend
relationship of ESG disclosure on sustainable corporate
growth. Prior to regression, this paper tests for differences in
the means and medians of the dependent and control variables in
two samples of high and low level ESG disclosure. The results are
shown in Table 3, the means and medians of sustainable growth
in the sample group with high level ESG disclosure are 4.376 and
3.647, respectively, which are higher than those in the sample
group with low level ESG disclosure (3.794 and 2.942) and
significantly different at the 0.01 level, indicating that the
sustainable growth rate in the group with high level ESG
disclosure is higher than that in the group with low level ESG
disclosure, which was basically consistent with existing research
(Grewal et al., 2019). The test for the difference between the mean
and median of Lev, Cf, Roa, and Size in the two sample groups; it
can be seen that the financial level and company size of the high
ESG disclosure sample group are clearly higher than those of the
low ESG disclosure group, which lays the foundation for the
underlying regressions in the later section.
Benchmark regression analysis
To verify the effect of ESG disclosure on corporate
sustainable growth, a cascade regression is used to test the
results, which are shown in Table 4. First, the independent
and dependent variables are regressed by controlling for
industry and year under the panel fixed effects model, and the
results are shown in column 1) of Table 4, which shows that ESG
disclosure plays a positive role in promoting sustainable
corporate growth. Second, to further exclude the interference
caused by the firm’s own factors, further control variables are
added to further analyze the main effects, and the results are
shown in column 2) of Table 4, where ESG disclosure positively
affects firm sustainable growth (β1 = 0.136,p<0.01), and the
marginal coefficient of ESG is 0.136, which means that, all else
being equal, on average, each unit increase in ESG disclosure unit
increase in ESG disclosure will consistently increase the
sustainable growth rate by 13.6%, thus validating hypothesis
H1a that ESG disclosure significantly and positively affects
sustainable corporate growth.
TABLE 2 Statistics of the regression variables.
Variable N Mean sd min p50 max
SGR (%) 1,608 3.992 3.250 0.308 3.191 15.68
ESG 1823 3.468 2.521 1 4 8
Lev 1823 0.531 0.214 0.050 0.547 0.979
Cf 1823 0.057 0.074 0.203 0.055 0.249
Roa 1823 0.053 0.058 0.351 0.038 0.209
Size 1823 24.30 1.427 19.73 24.19 26.84
Soe 1823 0.590 0.492 0 1 1
SP 1823 0.045 0.075 0 0 0.278
TABLE 3 Statistics of the regression variables.
Varibles High level ESG disclosure Low level ESG disclosure Difference in
means (T test)
Median difference
(Z test)
Number Mean Median Number Mean Median
SGR 548 4.376 3.647 1,060 3.794 2.942 0.582*** 16.842***
Lev 610 0.545 0.562 1,213 0.524 0.534 0.021** 4.008**
Cf 610 0.065 0.061 1,213 0.053 0.051 0.012*** 6.242**
Roa 610 0.061 0.043 1,213 0.048 0.035 0.013*** 9.573***
Size 610 24.716 24.679 1,213 24.085 23.923 0.631*** 52.758***
Soe 610 0.620 1.000 1,213 0.575 1.000 0.045* 0.000
SP 610 0.044 0.000 1,213 0.046 0.000 0.002 0.258
***, ** and * denote significance levels at 1, 5 and 10%, respectively.
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Quantile regression
The traditional ordinary least squares method calculates the
magnitude of the coefficients from an average perspective and is
unable to capture the differential impact of ESG disclosure on the
future growth opportunities of companies. In contrast, quantile
regression is a regression method that estimates the coefficients
of independent variables based on the conditional distribution of
the explanatory variables and is able to use diverse information
from different quantile groups for regression analysis of the
model (Teng et al., 2021), and Table 5 presents the results of
using quantile regression. Five quartiles of sustainable corporate
growth were selected from small to large, namely 10, 25, 50,
75 and 90%. The regression coefficient of ESG disclosure is
0.047 at the 10% quantile of sustainable growth rate, which is
not significant; at the 25% quantile, the regression coefficient of
ESG disclosure is 0.078, which is significant at 1% confidence
level; at the 50% quantile, the regression coefficient of ESG
disclosure is 0.095, which is significant at 1% confidence level;
at the 75% quantile The regression coefficient of ESG disclosure is
0.163, which is significant at the 1% confidence level; the
regression coefficient of ESG disclosure is 0.190; at the 90%
quantile, which is significant at the 1% confidence level. The
coefficient of ESG disclosure increases gradually as the quantile
increases, indicating that ESG disclosure has a greater impact on
the sustainable growth rate of companies with strong future
growth capacity, this finding is consistent with that of Hodder-
Webb et al. (2009).
Robustness check
In order to make the findings more reliable, a series of
robustness tests were conducted using the replacement
variable method, replacement of the study sample, propensity
score matching, reverse causality test, and difference in difference
method, and the results of various tests indicated that ESG
disclosure to enhance sustainable corporate growth is not
randomly correlated and the results are reliable.
1. Replace the dependent variable. To mitigate the causal
differences due to measurement error, replace the measurement
of the dependent variable and thus test the robustness of the
results, recalculate the firm’s sustainable growth rate according to
Van Horne’s sustainable growth model (Van Horne, 1988),
SGR_1 = net sales margin*earnings retention rate* (1 + equity
ratio)/(1/total asset turnover net sales margin*earnings retention
rate × (1 + equity ratio)), The specific results are shown in
column (1) of Table 6, the regression coefficient of ESG is
0.003 and is significantly positive at the 1% level, Validating H1a.
2. Changing the study sample. Compared with general prefecture-
level cities, municipalities directly under the central government enjoy
better central policy support and tax benefits, and have set up bonded
zones with a high degree of reform and openness, which can make
better investment attraction and economic development. It is more
advanced in terms of financial support and talent attraction and
cultivation, and its degree of influence on the sustainable development
of enterprises is relatively deep. In order to avoid the influence of the
special economic attributes of the municipality on the estimation
results. This study removes the sample of municipalities directly under
the central government for subsample testing, and the regression
results are shown in column (2) of Table 6, The coefficient of ESG
performance is 0.095, which is significant at 1% confidence level, again
validating H1a and the results are robust.
3. Replace the independent variable. There is no uniform
standard for ESG assessment methodology due to differences
between institutions in the specific content of the ESG
framework, industry “best practices”and weighting of
subsections. In order to avoid the error caused by the scoring
of one institution, we select the Huazheng ESG rating (ESG_1) as
the robustness of ESG disclosure. The reason is that it refers to
the mainstream Huazheng ESG rating framework abroad and
combines the characteristics of the Chinese capital market,
subdividing the three pillars of environment, society and
governance into 14 themes and 26 key indicators, covering all
TABLE 4 Impact of ESG disclosure and corporate sustainable growth:
benchmark regression.
Dep.Var OLS
(1) (2)
SGRt+1 SGRt+1
ESG 0.193*** 0.136***
(6.58) (4.55)
Lev 10.267***
(16.50)
Cf 3.494**
(2.30)
Roa 18.149***
(6.82)
Size 0.459***
(4.88)
Soe 0.516***
(3.01)
SP 0.229
(0.27)
Year fixed effects Yes Yes
Industry fixed effects Yes Yes
Constant 0.151 7.929***
(0.40) (3.82)
Observations 1,608 1,608
Rsquared 0.246 0.411
Numbers in parentheses are tvalues of twotailed tests,***, ** and * denote significance
levels at 1, 5 and 10%, respectively.
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Wang et al. 10.3389/fenvs.2022.1015764
listed companies, with good continuity and availability of data.
As shown in column (3) of Table 6, and the results are robust.
4. Propensity score matching. In order to solve the problem of
possible sample selection bias, this study divided ESG disclosure into
high and low groups according to their mean values and matched
according to the more widely used kernel matching method, so that
the treatment and control groups were as similar as possible in terms
of other characteristics Lev、Cf、Roa、Size、Soe、SP, except for
the differences in ESG disclosure, and the absolute values of bias in
the specific paired samples. The maximum value of percentages does
not exceed 5%, and none of the differences in variables after
matching are significant, indicating that there is no significant
difference between the treatment and control groups after
matching, satisfying the requirements of the balanced hypothesis
test for propensity score matching. The matched data were subjected
to regression analysis, and the specificresultsareshownincolumn
(4) of Table 6,wheretheeffectofESGdisclosure on corporate
sustainable growth remains significantly positive (β1 = 0.107, p<
0.001), and the results still support H1a.
5. Reverse causality test. Considering the possibility of
reverse causality between ESG disclosure and sustainable
growth, for example, a higher sustainable growth rate
impliesbetterbusinessperformance,whichinturnmay
lead to a greater willingness to invest in ESG and make
higher levels of ESG disclosure. Thus, if there is a reverse
causality between ESG disclosure and sustainable growth,
then sustainable growth may have an impact on corporate
ESG disclosure with period lag. Based on this, this paper runs
regressions with sustainable growth as the independent
variable and ESG disclosure with two lags as the dependent
variable, and the results are shown in column (5) of Table 6.It
can be found that corporate sustainable growth does not have
an impact on ESG disclosure, and therefore, there is no reverse
causality problem.
6. Difference in difference test. To address the endogeneity
problem arising from firm heterogeneity, DID approach is used to
compare ESG disclosure with or without ESG disclosure and firm
sustainable growth over time, drawing on Tsang et al. (2021) and the
regression model (2) is shown below. Where Post_ESG is a dummy
variable, that is, assigned a value of 1 if the SynTao Green Finance
ESG rating index disclosed ESG information in the current and
subsequent years and 0 otherwise. β1 is a DID estimate that captures
the incremental change in sustainable growth of firms that adopted
ESG disclosure (treatment group) relative to firmsthatdidnotESG
disclosure (control group) over the same period. Column (6) of
Table 6 reports the results of the DID regression with a coefficient of
0.670 for Post_ESG, which is significantly positive at the 1% level,
indicating that firm disclosure of ESG information can significantly
TABLE 5 The results of quantile regression SGR.
(1) (2) (3) (4) (5)
SGR
t+1
0.1 SGR
t+1
0.25 SGR
t+1
0.5 SGR
t+1
0.75 SGR
t+1
0.9
ESG 0.047 0.078*** 0.095*** 0.163*** 0.190**
(1.46) (2.87) (2.96) (3.74) (2.45)
Lev 4.979*** 5.671*** 8.289*** 12.222*** 14.984***
(8.55) (11.58) (14.22) (15.51) (10.67)
Cf 3.110** 1.945* 2.023 1.451 1.541
(2.33) (1.73) (1.51) (0.80) (0.48)
Roa 10.794*** 15.252*** 20.284*** 19.733*** 20.003***
(6.09) (10.24) (11.43) (8.23) (4.68)
Size 0.067 0.043 0.158* 0.578*** 0.978***
(0.74) (0.57) (1.76) (4.77) (4.53)
Soe 0.501*** 0.069 0.278 0.950*** 1.505***
(2.83) (0.47) (1.57) (3.97) (3.53)
SP 1.961** 2.133*** 1.381 1.394 2.044
(2.07) (2.68) (1.46) (1.09) (0.90)
Year fixed effects Yes Yes Yes Yes Yes
Industry fixed effects Yes Yes Yes Yes Yes
Constant 0.318 0.839 1.380 10.718*** 19.695***
(0.13) (0.41) (0.56) (3.23) (3.33)
Observations 1,608 1,608 1,608 1,608 1,608
Pseudo R2 0.191 0.232 0.284 0.342 0.386
Numbers in parentheses are tvalues of twotailed tests, ***, ** and * denote significance levels at 1, 5 and 10%, respectively.
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Wang et al. 10.3389/fenvs.2022.1015764
and positively affect the sustainable growth rate of firms compared
to no disclosure of ESG information.
SGRit+1β0+β1*Post ESGit +β2*Controlsit +ΣIndustry
+ΣYear +ε(2)
Further analysis
Channel analysis
In this section, we explore potential channels through which ESG
disclosures can contribute to sustainable corporate growth. Following
the previous analysis, the aim is to test whether ESG disclosure
enhances sustainable corporate growth by reducing corporate
financing constraints and enhancing human resource pools.
As mentioned in the previous theoretical analysis, ESG
disclosure promotes sustainable growth by improving
information transparency and thus reducing corporate
financing constraints, conveying the construction of good
corporate governance, which in turn reduces financing
constraints and improves human resource reserves. To further
clarify the mechanism of the impact of ESG disclosure on
sustainable corporate growth, drawing on Kaplan and
Zingales’(1997) measure of financing constraints, the
corporate financing constraint is measured using the KZ
index, KZ = -1.002*Cf/Ta + 3.139*Lev+39.368*Div/
Ta+1.315*Cash/Ta + 0.283*Tq, where Cf, Div, and Cash are
the net cash flow from operations, cash dividends, and cash
holdings, respectively, and Ta are normalized by the total assets
at the beginning of the period, and Lev and Tq are the corporate
gearing ratio and Tobin’s Q, respectively; Drawing on the
measurement of human capital in the study of Khan et al.
(2020), the proportion of employees with master’s degree or
above is used as a proxy for human capital (Labor).
According to the annual median of financing constraints
and human capital, the sample was divided into " high financing
constraints”and " low financing constraints”groups, “high
human capital”and “low human capital”groups. The model
1) is tested by dividing the sample into “financing constrained”
and “financing constrained”groups, “high human capital”
and “low human capital”groups. If ESG disclosure affects
sustainable growth through the financing constraint channel,
then ESG disclosure has a greater impact on sustainable
growth for firms with high financing constraints, mainly
because firms with high financing constraints have a
stronger willingness to attract internal and external investors
by improving ESG disclosure compared to firms with low
financing constraints, which in turn provides the necessary
financial support for sustainable growth. Therefore, the
incentive effect of ESG on sustainable growth is more
pronounced in the subgroup of firms with high financing
constraints (Cao et al., 2021). In addition, ESG disclosure
TABLE 6 Robustness check.
Model (1) (2) (3) (4) (5) (6)
Dep. Var. Replace variable Changing sample Replace variable PSM Reverse causality test DID
SGR_1 SGR
t+1
SGR
t+1
SGR
t+1
ESG
t
SGR
t+1
ESG 0.003*** 0.095** 0.107***
(2.80) (2.25) (3.42)
ESG_1 0.033***
(2.81)
L2.SGR 0.007
(1.63)
Post_ESG 0.670***
(4.26)
controls Yes Yes Yes Yes Yes Yes
Year Yes Yes Yes Yes Yes Yes
Industry Yes Yes Yes Yes Yes Yes
Constant 0.383*** 15.149*** 5.201** 4.679* 5.548*** 7.520***
(3.98) (3.26) (2.17) (1.92) (16.08) (3.72)
Observations 1823 866 1419 1583 927 1608
Rsquared 0.237 0.259 0.415 0.462 0.376 0.410
Numbers in parentheses are tvalues of twotailed tests, ***, ** and * denote significance levels at 1, 5 and 10%, respectively.
Frontiers in Environmental Science frontiersin.org09
Wang et al. 10.3389/fenvs.2022.1015764
improves corporate information transparency, conveys
responsible and good corporate governance through
signaling effects, and highlights a good corporate image, thus
attracting and retaining talented employees, improving their
job satisfaction, and increasing their commitment to their jobs,
and such talented, satisfied, and dedicated employees tend to be
more involved in corporate business decisions and can make
more valuable contributions to corporate development. The
impact of ESG disclosure on sustainable growth is more
pronounced in the high human capital group as a result of
the involvement of high level human capital in corporate
decision making, which is necessary for sustainable growth
(Syed et al., 2020;Yang et al., 2021). The specific grouping
regression results are shown in Table 7. Comparing the
regression results in columns 1) and 2) of Table 7, the effect
of ESG disclosure on sustainable growth of firms with high
financing constraints is significant relative to the low financing
constraints group; comparing the regression results in columns
3) and 4) of Table 7, the effect of ESG disclosure on sustainable
growth of firms under the two subsample groups are
significantly positive, and the effect of ESG disclosure on
corporate sustainable growth is more significant in the high
human capital group relative to the low human capital group;
thus supporting the impact mechanism that ESG disclosure
affects corporate sustainable growth through financing
constraints and human capital.
Analysis of heterogeneity
Previous studies have shown that different industry attributes
and external environment may influence the relationship
between ESG disclosure and sustainable corporate growth,
especially in the current volatile world political situation,
industry attributes and environmental uncertainty grouping
are more meaningful (Zhang et al., 2021). In order to assess
the impact of different influencing factors on the findings of this
paper, this paper regressed the environmentally sensitive and
non-environmentally sensitive industry groups, the high
environmental uncertainty group and the low environmental
uncertainty group, and conducted group regressions. Referring
to Teng et al. (2021), the consequences of ESG disclosure impact
are closely related to the type of industry. Among them,
environmentally sensitive companies were standardized by the
heavy pollution industries identified in China’s“Guidelines for
Environmental Information Disclosure of Listed Companies”in
2010. Companies in 11 industries, B07, B08, B09, C25, C26, C28,
C29, C30, C31, C32 and D44, were considered as
environmentally sensitive industries, while the rest of the
industries were considered as non-environmentally sensitive
industries. The environmental uncertainty refers to the study
of Ghosh and Olsen (2009) and the standard deviation of the
nonnormal sales revenue of enterprises in the past 5 years is
divided by the average of the past 5 years’sales revenue, and the
above calculation results are divided by the industry
environmental uncertainty to finally arrive at the industry
adjusted environmental uncertainty (EU), the specific results
are shown in Table 8.
From column (1) (2) of Table 8,itcanbeseenthatESG
disclosure of environmentally sensitive industries has no significant
effect on corporate sustainable growth, and the coefficient of ESG
disclosure of non-environmentally industries on corporate
sustainable growth is 0.119 and is significantly positive at the 1%
level. The reason for this is not difficult to understand; ESG
disclosure of non-environmentally sensitive industries may play a
signaling and reputation mechanism, which in turn promotes
sustainable corporate growth. With the increase in national
environmental management in recent years, environmentally
sensitive industries are facing more stringent environmental
regulation, and disclosure of relevant ESG information not only
fails to attract stakeholders, but also may bring about a
“greenwashing”, which in turn is not significant for corporate
sustainable growth (Ren et al., 2022). Consistent with the
findings of Gull et al. (2022), the best-in class companies in
environmental performance have higher financial performance
compared to the worst and average companies in their category.
Asshownincolumn(3)(4)ofTable 8, ESG disclosure under
low environmental uncertainty has no significant effect on corporate
sustainable growth, and the coefficient of ESG disclosure of firms
with high environmental uncertainty on corporate sustainable
growth is 0.143 and is significantly positive at the 10% level.
Analytically, the higher the environmental uncertainty, the higher
the production and operation risk of enterprises will be, in order to
gain a place in the fierce market competition, enterprises are more
motivated to improve their ESG performance in order to show their
TABLE 7 Impact mechanism test.
Dep. Var Financing
constraints
Human capital
Low High Low High
(1) (2) (3) (4)
ESG 0.067 0.175*** 0.120** 0.236***
(1.26) (3.68) (2.54) (5.08)
controls Yes Yes Yes Yes
Year Yes Yes Yes Yes
Industry Yes Yes Yes Yes
Constant 7.442** 8.511** 0.435 2.198
(2.01) (2.08) (0.23) (0.72)
Observations 828 657 865 737
Rsquared 0.363 0.368 0.265 0.242
Numbers in parentheses are tvalues of twotailed tests, ***, ** and * denote significance
levels at 1, 5 and 10%, respectively.
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Wang et al. 10.3389/fenvs.2022.1015764
sound operation level and financial reserves, so they will actively
disclose ESG information to send positive signals to the outside
world, which can not only build a good corporate image and gain a
good reputation in the fierce competition from employees and
consumers, thus enhancing corporate human resource reserves,
and also, attracting financial institutions andinvestorstobroaden
corporate financing channels, reduce corporate financing
constraints, and further enhance sustainable growth (Utomo
et al., 2020).
Discussion and policy
recommendations
Practicing ESG responsibility is an inevitable requirement to
adhere to sustainable development, an important initiative to
implement the new development concept, and significant to
achieve carbon capping by 2030. This paper investigates the
impact of ESG disclosure on corporate sustainable growth using a
sample of Chinese listed companies with 300 shares in Shanghai and
Shenzhen from 2015-2019, and draws the following findings: first,
ESGdisclosurecanenhancecorporate sustainable growth, the
findings further support the spillover effect of ESG disclosure and
provide new evidence to explore the uncertain consequences of
information disclosure from a sustainable growth perspective, The
quantile regression analysis found that the higher the sustainable
growth quantile of the firm, the greater the contribution of ESG
disclosure, which is similar to the study of Teng et al. (2021),which
both concluded that the role of ESG is more pronounced in the upper
quantile of SGR. Second, ESG disclosure enhances sustainable growth
by improving human resource pool and reducing financing
constraints; human resources, as a core competency of firms, can
effectively buffer external shocks, improve operational performance,
and enhance sustainable growth, a finding that corroborates the study
of Hahn and Kühnen (2013), that sustainability disclosure increases
transparency, improves corporate reputation, and achieves the goal of
motivating employees and thus employee support the goal of
dedication to the firm; Third, the heterogeneity analysis found
that ESG disclosure of non-environmentally sensitive firms can
promote sustainable growth compared to environmentally
sensitive firms; ESG disclosure with high environmental
uncertainty can help firms grow sustainably compared to low
environmental uncertainty; previous studies have also supported
the idea that ESG disclosure promotes more for non-
environmentally sensitive firmsaswellashighenvironmental
uncertainty from different perspectives, for example, Wu et al.
(2020) study argues that green development and environment-
friendly development can enhance development efficiency; Kumar
(2022) study argues that as uncertainty increases, high levels of ESG
disclosure by tourism firms can build good relationships and good
reputation with various stakeholders, especially during the COVID-
19 period and during the global financial crisis, ESG disclosure can
moderate the negative impact of economic uncertainty on corporate
value; in the context of increased uncertainty in the external
environment, ESG disclosure can play a signaling and reputation
effect, which can bring confidence and hope to stakeholders and thus
promote sustainable growth.
Combined with the findings of this paper, the following
management insights can be obtained: first, good ESG
practices and complete ESG information disclosure can help
enhance corporate value, and the concept of ESG development
should be implemented from top to bottom; for industries with
high external environmental uncertainty and environmental
sensitivity, ESG information disclosure can give full play to
its value and play an important role in promoting sustainable
growth. Therefore, as a strategic tool for long-term development,
companies should establish ESG management departments
and clarify the responsibilities of relevant personnel to truly
assume the role of fulfilling ESG practices, strengthening ESG
information disclosure and attracting external ESG investment,
TABLE 8 Group regression results.
Dep. Var (1) (2) (3) (4)
Non Environmentally Sensitive Environmentally Sensitive Low EU High EU
ESG 0.119*** 0.187 0.060 0.143*
(3.32) (1.54) (1.58) (1.89)
controls Yes Yes Yes Yes
Year Yes Yes Yes Yes
Industry No No Yes Yes
Constant 6.065*** 22.584*** 0.247 19.952***
(3.20) (3.49) (0.09) (4.06)
Observations 1,410 198 942 498
Rsquared 0.298 0.320 0.476 0.228
Numbers in parentheses are tvalues of twotailed tests, ***, ** and * denote significance levels at 1, 5 and 10%, respectively.
Frontiers in Environmental Science frontiersin.org11
Wang et al. 10.3389/fenvs.2022.1015764
so as to lay the foundation for long-term corporate development.
Second, in the current environment of increased uncertainty,
investors should pay more attention to corporate ESG disclosure;
highly rated ESG disclosure has greater advantages in human
resource reserves and financing, providing inexhaustible
power to achieve sustainable growth, and for investors, ESG
disclosure is an important reference for their investment.
Third, the government should promote the construction of
market-oriented process, create an open and competitive
market environment, further implement the relevant
regulations and policies on ESG disclosure, objectively
promote the level of ESG disclosure of Chinese listed
companies, and also dovetail with international standards to
build an ESG rating system construction with Chinese
characteristics.
Data availability statement
The original contributions presented in the study are
included in the article/supplementary material, further
inquiries can be directed to the corresponding author.
Author contributions
Methodology, NW; writing—original draft, NW;
writing—review and editing, NW and DL; data analysis, DL
and NW; resources, DL; conceptualization, DL and DC; formal
analysis, DC and MX; supervision, DC and MX. All authors have
read and agreed to the published version of the manuscript.
Funding
This research was funded by the Key Projects of Social
Science Fund of Xinjiang Production and Construction Corps
of China (No., 19ZD02); The project of Middle-aged and Young
Teachers’Basic Ability Promotion Project of Guangxi (No.,
2020KY10026); The Qinzhou Structural Health Monitoring
Research Center of Engineering Technology (No., 2017ZRKT06).
Acknowledgments
I thank the referees for valuable comments. All remaining
errors are my own responsibility.
Conflict of interest
The authors declare that the research was conducted in the
absence of any commercial or financial relationships that could
be construed as a potential conflict of interest.
Publisher’s note
All claims expressed in this article are solely those of the
authors and do not necessarily represent those of their affiliated
organizations, or those of the publisher, the editors and the
reviewers. Any product that may be evaluated in this article, or
claim that may be made by its manufacturer, is not guaranteed or
endorsed by the publisher.
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