The Impact of ESG on the Cost of Equity Financing Evidence from China
Research Article
Open Access
CC BY

The Impact of ESG on the Cost of Equity Financing Evidence from China

Fengming Qiu 1, Zhenghao Yang 2* Hancheng Ni 3, Yueliang Zhou 4
1 Jiangxi Agricultural University
2 Jiangxi Agricultural University
3 Wuhan Britain-China School
4 Nanjing Jinling Middle School Hexi Branch
*Corresponding author: Tony_yang2005@163.com
Published on 16 September 2025
Journal Cover
AEMPS Vol.217
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-363-5
ISBN (Online): 978-1-80590-364-2
Download Cover

Abstract

This paper delves into the impact of environmental, societal, and governance (ESG) excellence at the expense of equity capital. This research scrutinises the correlation between the costs associated with equity funding and ESG excellence by utilising MSCI ESG ratings, encompassing a sample of 40 firms listed in China. Grounded in the principles of signalling theory, stakeholder theory, the concept of information asymmetry, and the framework of corporate risk mitigation, the research constructs a theoretical model and conducts a regression examination. The findings indicate an inverse relationship between equity financing costs and ESG excellence, suggesting that superior ESG ratings are linked to reduced equity financing expenses. This inquiry contributes to a better understanding of how ESG excellence influences financing choices, underscores the significance of ESG criteria in corporate financial strategies, and aids in the ongoing enlargement of ESG-related scholarly work. Furthermore, the research underscores the necessity of refining ESG transparency and reporting mechanisms to bolster investor trust and foster more sustainable and accountable investment behaviours.

Keywords:

ESG, impact, cost, equity financing

View PDF
Qiu,F.;Yang,Z.;Ni,H.;Zhou,Y. (2025). The Impact of ESG on the Cost of Equity Financing Evidence from China. Advances in Economics, Management and Political Sciences,217,10-20.

References

[1]. Zhong, Q. (2019). Ecology: Clean, Clear Waters and Lush Mountains, "Gold and Silver Mountain". The Chinese Dream and Zhejiang's Practice—General Report Volume, 187-214.

[2]. Lee, J., & Song, C. Y. (2013). Estimation of submerged-arc welding design parameters using Taguchi method and fuzzy logic. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 227(4), 532-542.

[3]. Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analysing the impact of ESG on financial performance. Journal of Environmental Management, 345, 118829.

[4]. Yu, G., & Wang, B. (2016). The impact of information disclosure quality on the cost of equity financing—based on time series perspective. Journal of Financial Risk Management, 5(3), 107-112.

[5]. Xie, Z. (2017). Promoting Green and Low-Carbon Development to Address Challenges of Climate Change. Chinese Journal of Urban and Environmental Studies, 5(2), 1750008.

[6]. Haluza‐DeLay, R. (2014). Religion and climate change: varieties in viewpoints and practices. Wiley Interdisciplinary Reviews: Climate Change, 5(2), 261-279.

[7]. Wang, Y., Guo, C. H., Chen, X. J., Jia, L. Q., Guo, X. N., Chen, R. S., ... & Wang, H. D. (2021). Carbon peak and carbon neutrality in China: Goals, implementation path and prospects. China Geology, 4(4), 720-746.

[8]. Achumba, I. C., Ighomereho, O. S., & Akpor-Robaro, M. O. M. (2013). Security challenges in Nigeria and the implications for business activities and sustainable development. Journal of economics and sustainable development, 4(2).

[9]. Christie, R. (2024). ESG Reporting as a Sustainability Performance Measurement in Educational Institutions (Doctoral dissertation, Hochschule Rhein-Waal).

[10]. Prencipe, R. (2024). The G in ESG: an analysis of the impact of Corporate Governance indicators on firm performance.

[11]. Clarke, B., Otto, F., Stuart-Smith, R., & Harrington, L. (2022). Extreme weather impacts of climate change: an attribution perspective. Environmental Research: Climate, 1(1), 012001.

[12]. Park, S. R., & Jang, J. Y. (2021). The impact of ESG management on investment decision: Institutional investors’ perceptions of country-specific ESG criteria. International Journal of Financial Studies, 9(3), 48.

[13]. Xiaoyu, H. (2023). Corporate ESG performance and financing constraints: Empirical evidence from Chinese listed companies. Journal of Applied Finance and Banking, 13(5).

[14]. Botosan, C. A. (1997). Disclosure level and the cost of equity capital. Accounting Review, 323-349.

[15]. Yu, K., Wu, Q., Chen, X., Wang, W., & Mardani, A. (2023). An integrated MCDM framework for evaluating the environmental, social, and governance (ESG) sustainable business performance. Annals of Operations Research, 1-32.

References

[1]. Zhong, Q. (2019). Ecology: Clean, Clear Waters and Lush Mountains, "Gold and Silver Mountain". The Chinese Dream and Zhejiang's Practice—General Report Volume, 187-214.

[2]. Lee, J., & Song, C. Y. (2013). Estimation of submerged-arc welding design parameters using Taguchi method and fuzzy logic. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 227(4), 532-542.

[3]. Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analysing the impact of ESG on financial performance. Journal of Environmental Management, 345, 118829.

[4]. Yu, G., & Wang, B. (2016). The impact of information disclosure quality on the cost of equity financing—based on time series perspective. Journal of Financial Risk Management, 5(3), 107-112.

[5]. Xie, Z. (2017). Promoting Green and Low-Carbon Development to Address Challenges of Climate Change. Chinese Journal of Urban and Environmental Studies, 5(2), 1750008.

[6]. Haluza‐DeLay, R. (2014). Religion and climate change: varieties in viewpoints and practices. Wiley Interdisciplinary Reviews: Climate Change, 5(2), 261-279.

[7]. Wang, Y., Guo, C. H., Chen, X. J., Jia, L. Q., Guo, X. N., Chen, R. S., ... & Wang, H. D. (2021). Carbon peak and carbon neutrality in China: Goals, implementation path and prospects. China Geology, 4(4), 720-746.

[8]. Achumba, I. C., Ighomereho, O. S., & Akpor-Robaro, M. O. M. (2013). Security challenges in Nigeria and the implications for business activities and sustainable development. Journal of economics and sustainable development, 4(2).

[9]. Christie, R. (2024). ESG Reporting as a Sustainability Performance Measurement in Educational Institutions (Doctoral dissertation, Hochschule Rhein-Waal).

[10]. Prencipe, R. (2024). The G in ESG: an analysis of the impact of Corporate Governance indicators on firm performance.

[11]. Clarke, B., Otto, F., Stuart-Smith, R., & Harrington, L. (2022). Extreme weather impacts of climate change: an attribution perspective. Environmental Research: Climate, 1(1), 012001.

[12]. Park, S. R., & Jang, J. Y. (2021). The impact of ESG management on investment decision: Institutional investors’ perceptions of country-specific ESG criteria. International Journal of Financial Studies, 9(3), 48.

[13]. Xiaoyu, H. (2023). Corporate ESG performance and financing constraints: Empirical evidence from Chinese listed companies. Journal of Applied Finance and Banking, 13(5).

[14]. Botosan, C. A. (1997). Disclosure level and the cost of equity capital. Accounting Review, 323-349.

[15]. Yu, K., Wu, Q., Chen, X., Wang, W., & Mardani, A. (2023). An integrated MCDM framework for evaluating the environmental, social, and governance (ESG) sustainable business performance. Annals of Operations Research, 1-32.

Cite this article

Qiu,F.;Yang,Z.;Ni,H.;Zhou,Y. (2025). The Impact of ESG on the Cost of Equity Financing Evidence from China. Advances in Economics, Management and Political Sciences,217,10-20.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of the 4th International Conference on Financial Technology and Business Analysis

ISBN: 978-1-80590-363-5(Print) / 978-1-80590-364-2(Online)
Editor: Lukáš Vartiak
Conference website: https://2025.icftba.org/
Conference date: 12 December 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.217
ISSN: 2754-1169(Print) / 2754-1177(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:

1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.

2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.

3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).

For authors
For editors
For reviewers

Cookies are used by this site.
Copyright © 2024 EWA Publishing, its licensors, and contributors. All rights reserved, including text and data mining, AI training, and similar technologies.