Does banking relationships promote environmental, social, and governance performance? Empirical evidence from A‐share listed firms in China

Abstract

This study investigates the impact of banking relationships on corporate environmental, social, and governance (ESG) performance using data from A‐share listed firms in China from 2009 to 2019. Results show that banking relationships negatively impact corporate ESG performance. Mechanism analysis finds that banking relationships increase agency costs and financial investment, thereby diminishing ESG performance. Corporate executives with banking backgrounds and banks holding firm shares dampen ESG performance, whereas firms holding bank shares do not yield significant impact on ESG performance. Our study also finds that the negative impact of banking relationships on ESG performance is mitigated by analyst attention and supervisory institutional investors.