Financial Constraint’ Impact on Firms’ ESG Rating Based on Chinese Stock Market

Abstract

Enterprises with strong financing constraints will be under the pressure of difficult obtaining funds and are more likely to fall into financial difficulties. This will also have a certain impact on the ESG rating of rating agencies. This paper explores the impact of corporate financing constraints on ESG ratings. Firstly, this paper constructs the financing constraint index through principal component analysis and then uses the regression model to explore the impact of financing constraints on ESG scores. The results of the article show that the degree of financing constraints of the company (the smaller the FC value) has a negative impact on the ESG rating of the company. The result is similar to the score for environmental protection, social responsibility, and corporate governance. This paper will contribute to the expansion of the literature on ESG ratingsrelated areas in corporate finance.