Financial Order Maintenance and Corporate ESG Performance:Evidence from Financial Judicial Trials
As the basic unit of the national economy,companies should incorporate environmental(E),social(S),and governance(G)factors into their investment decisions,which is an effective means to achieve sustainable economic development.Corporate ESG practice has obvious positive externalities.Encouraging and guiding companies to actively carry out ESG practices has become a major issue of widespread concern in academia and practice.At the same time,China has attached great importance to improving the quality and efficiency of financial judicial trials in recent years,which has become an important means to optimize the financial legal environment,maintain financial market order,and stabilize financial functions.Improving financial justice provides enterprises with a more stable financial market environment for their development,and the demonstration effect of justice can also guide them to engage in some activities with positive ex-ternalities.Corporate ESG behavior is essentially an investment decision,which not only requires information exchange with the financial market and external financial support but also requires risk management to ensure stakeholders'benefits.Therefore,from the perspective of financial judicial trials,clarifying the impact of financial rule of law construction on cor-porate ESG performance is of great significance for strengthening China's financial governance capabilities,promoting cor-porate sustainable development,and achieving modernization in which humans and nature coexist in harmony.This study conducts a theoretical analysis and empirical examination of the relationship between financial judicial tri-als and corporate ESG performance.Based on the criminal first-instance judgments of the"crimes of disrupting the order of financial administration"published by China Judgments Online from 2014 to 2021,indicators to measure the efficiency and quality of financial judicial trials are constructed,and empirical tests are conducted combined with the ESG data from Sino-Securities Index Information Service.It is found that the higher efficiency and lower appeal rate of financial judicial trials in the city where a company is located results in better ESG performance.The causal relationship still holds after the treatment effect estimation,exogenous impact test,2SLS estimation,and robustness tests.Mechanism analysis shows that financial judicial trials can improve corporate ESG performance by reducing information asymmetry,easing compa-nies'financing constraints,and strengthening their risk management awareness.Further analysis shows that for those companies with more executives with legal backgrounds and located in cities with dense banking institutions,the role of fi-nancial judicial trials is more significant;moreover,the improvement in financial judicial trials is also conducive to reduc-ing ESG uncertainty and strengthening the enhancement effect of ESG on firm value.The marginal contributions of this study are as follows.(1)It expands relevant research in the field of law and fi-nance and corporate ESG.Based on financial justice data,this study discusses the impact of the optimization of financial judicial trials on corporate ESG from the perspectives of trial efficiency and quality and provides a useful supplement to lit-erature on traditional law and finance as well as ESG influencing factors.(2)Based on the functional finance theory,the impact mechanisms of financial judicial trials on corporate ESG are discussed,and the logical chain between the two is clarified.Financial judicial trials can ensure the stability of a series of financial functions such as information exchange,fi-nancing,and resource allocation by maintaining the order of the financial market,which provides a good financial environ-ment for companies to carry out ESG practices and improve their ESG performance.(3)The conclusions of this study have important implications and can provide policy suggestions for improving corporate ESG in terms of formal systems.This study proves that strengthening financial judicial trials can maintain financial market order,stabilize financial func-tions,and thus improve corporate ESG performance.It is of practical importance to comprehensively strengthen financial regulation,improve the governance capacity of the financial sector,and thus improve the quality and efficiency of finan-cial services for the real economy.It also provides a policy basis for encouraging companies to increase ESG investment and implement the concept of green and sustainable development.
Financial Order MaintenanceTrial EfficiencyAppeal RateESG
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