Impact of ESG Rating on Corporate Cash Conversion Cycle
LIU Chao，LI Danmeng，ZHENG Yujia
1.Nanjing University of Finance & Economics, Nanjing, China; 2.East China University of Science and Technology, Shanghai, China; 3. Nanjing Normal University, Nanjing, China
Abstract Employing a sample of A-share companies in the Shanghai and Shenzhen Stock Exchange from 2009 to 2021, this study examines whether and how ESG will affect the cash conversion cycle. The results show that ESG can decrease the cash conversion cycle, especially in accelerating the turnover speeds of accounts receivables and inventories. In addition, this effect is more pronounced in firms with higher sensitivities to environmental, societal, and corporate governance issues. Further analysis of the potential mechanisms shows that customer dependency, media coverage, product power, and financial pressure all have a role to play. Finally, the effect of ESG can also reduce the probability of financial distress and increase financial flexibility.
