The spillover effect of core enterprises' ESG performance on node enterprises' debt financing costs

Abstract

Despite growing attention to the impact of ESG performance on corporate finance, particularly debt financing costs at the firm level, spillover effects at the supply chain level remain underexplored. Using data from Chinese A-share listed companies over the 2012–2023 period, we build supply chain networks to examine the spillover effects of core enterprises' ESG performance to node enterprises. The empirical results confirm that core enterprises' good ESG performance can significantly reduce node enterprises' debt financing costs even after a series of robustness tests. This reduction effect is achieved through increasing the supply chain liquidity or reducing supply chain disruption risk. Heterogeneity analyses demonstrate that the reduction effect is more prominent when core and node enterprises share consistent characteristics and are located in different provinces. Overall, our findings advance the understanding of ESG spillover effects within supply chain networks and highlight supply chain ESG management's important role in corporate finance.