Does Digital Finance Improve Corporate ESG Performance? An Intermediary Role Based on Financing Constraints

Round 1

Reviewer 1 Report

See the attached.

Comments for author File: Comments.pdf

I recommend that the English writing in this document undergo further revision and polishing by an editor who is familiar with, or has a background in, financial academic research.

Author Response

Thanks a lot for your time and advice you have raised. We have made revisions to your suggestions one by one. You can see the specific changes in the attached document.

1、All observations in this paper are constructed based on a 'firm-year' framework. In response to your suggestion, we believe that the concentration of firms in different cities does have an impact on the average level of the Digital Finance City Level Index and that it would be interesting to explore this issue further, but as this paper focuses on the relationship and mechanisms between macro-level performance, i.e. the level of digital finance development, and micro-level firm performance, i.e. ESG performance, it focuses on the firm level rather than the city level. This is also reflected in the heterogeneity analysis section. Therefore, due to the focus of this paper, we will consider exploring this suggestion further in future research.

2、On this issue, you raised, the database for this study are all listed companies in China's A-share listed companies between 2011 and 2021 excluding those in the financial and insurance sectors, those with significant data omissions, data outliers, and those with PT, ST, and *ST stages. In the course of this overhaul, we cleaned and performed statistical operations on the original data again, and found that there were indeed sample omissions in the original data, and we carried out the work of supplementing the sample data. The final sample size in regression is 32818.

3、Thank you very much for pointing out this issue. In this paper, the data was collected using the updated 2022 ESG rating scale of Huazheng, which changed its rating scale for corporate ESG performance from the previous 9 levels of CCC-AAA to 8 levels of CCC-AA in the first quarter of 2022 and updated the historical rating data under this scale. As a result, the ESG ratings of companies in the data are assigned a value of 1-8, as presented in Table 2. In addition, the size of the control variable is defined as the "natural logarithm of total assets at the end of the year" and the sample size in Table 2 is the sample of observations participating in the regression rather than the original sample size.

4、To address this issue, we identified the original dataset and checked the correctness of the TobinQ data, and the corrected data were re-cleaned and re-calculated to obtain new descriptive statistics and presented in Table 2, in which the minimum value of TobinQ is non-zero.

5、The FirmAge is defined as "the number of years the company has existed" in the control variables and has been modified in the table. In the calculation, the value of the company age is calculated by "company age = ln(year of observation - year of registration + 1)". In addition, as you raised the issue of the minimum value of company age in the descriptive statistics being 1.386, we have re-examined the original data set and found that there was a data cleaning issue in the initial processing of the data for this control variable, we have re-examined the data cleaning and arithmetic to address this issue and present the corrected results in Table 2. The minimum value is 0.

6、In this paper, the logarithmic transformation of the numerical financial index is not performed because the data of the variable is non-linearly distributed or has multiple extreme values, but mainly to reduce the fluctuation range of the variable, prevent the generation of heteroskedasticity and improve the efficiency of the operation, hence the logarithmic transformation normalization process. We can see a similar practice in the following literature: https://doi.org/10.1016/j.heliyon.2023.e13792

7、 Regarding the treatment of endogeneity, we have used GMM estimation to further address the endogeneity issue during the revision process.

8. We agree with your suggestion of adding city-level control variables and have added a new variable of GDP at the prefecture level to the set of control variables to provide a more comprehensive understanding of the relationship between digital finance and corporate ESG performance.

9、Thank you for pointing out this issue, which is a common sense error, so we have used the provincial index for digital finance in the baseline regression section and the city-level index for digital financial inclusion in the robustness test section to illustrate the robustness of the model in the revision process. The results of the revised robustness regressions are presented in the table.

10、The Peking University Digital Inclusion Index publishes data at the provincial, municipal, and county levels in China, so both the provincial and municipal data are derived from the same data source rather than being crunched.

11、We believe that your suggestion makes sense and have therefore added a robustness test for the role of cash flow between the core variables, finding that the level of digital finance development can facilitate ESG-related activities by increasing a firm's cash flow, in addition to improving its ESG performance by alleviating its financing constraints. This result is presented in a new robustness test table.

12、In addressing the endogeneity issue in this study, we chose Internet penetration data released by the China Statistics Bureau as the instrumental variable because, firstly, digital finance is largely dependent on the Internet and there is a significant correlation between the two, which has also been illustrated by relevant scholars. Secondly, when considering the homogeneity between Internet penetration and corporate ESG performance, we did not find any extant literature indicating that Internet penetration directly affects corporate ESG performance, and therefore tentatively concluded that Internet penetration is consistent with the relevance and homogeneity as an instrumental variable. On this basis, we conducted an over-identification test during the operation, and the results showed that our choice of the instrumental variable was exogenous and therefore justified as an instrumental variable. In addition, we use GMM estimation to further address the endogeneity issue.

13、We have carefully checked this article for copy-editing issues and have corrected errors.

14、We have reformatted the citations.

Author Response File: Author Response.pdf

Reviewer 2 Report

Dear Authors, 

Please find my suggestion to improve the paper:

1- Try to discuss the channels through which digital finance enhance ESG.

2- Provide diagnostics for the model adoption.

3- Controls are correlated in the matrix, did you control for hteroskedasticity?

4- You can benefi from merging tables to reduce the number of tables.

5- you also benefot from adding the following related literature.

https://doi.org/10.1002/csr.2361

10.1177/09721509221114679 

https://doi.org/10.1002/csr.2037

 good luck

 

Author Response

       Thank you for your suggestions and for the time you have given to our articles. We have made changes to address your suggestions and questions as follows: Firstly, we have added to the theoretical foundation's section the basis on which the model was constructed for the study. Secondly, as some variables in this study were logarithmically treated, we have added a systematic GMM model in the section dealing with endogeneity issues to address the endogeneity issues arising from the heteroskedasticity problem. In addition, we combined the baseline regression results and some of the robustness regression results in a single table to reduce the number of tables. Also, recent literature has been added to the literature review section to ensure that the research is up-to-date. You also suggest adding more channels to the tests, which we believe is necessary and we will further consider mechanisms other than financing constraints, such as green innovation and market regulation, in our future research.

Author Response File: Author Response.pdf

Reviewer 3 Report

Title: Does digital finance improve corporate ESG performance? --An intermediary role based on financing constraints

 

This study aims to examine the effect of the digital finance on corporate ESG performance, further, it explain the mediating role of financing constraints in this relationship.

 

I can see there is many aspects of the paper that should be improved before it can be accepted. For example:  

 

In the introduction section needs improvements. In the introduction section, some of the claims are generic and without any references. For example the first paragraphs of the introduction, the authors should mention the sources of information.

 

 

Contribution of the study is not clear. Please clarify your research questions, objectives, background motivation, theoretical and empirical motivation and the lines of contributions to the literature. You can do this by sharply articulating your research questions/objectives, identify the potential theoretical, background and theoretical motivation or gaps, and explain how your study contributes to the literature. You can do this by highlighting the weaknesses of prior studies as well. Currently, your introduction is very dry. Additionally, you need state clearly the contributions of the paper. For example, "Consequently, the current paper seeks to make the following contributions to the existing literature. First,…, Second,…., Third, …, Fourth,… and so on". The description of the contribution needs to be more forensic, needs to be more focussed.

 

Literature Review

 

The literature review appears incomplete, is not critical, nor is there sufficient academic support for the arguments in the article. Also, the is a lack of critical synthesis of the studies reviewed in the literature review, i.e., the literature review appears to be descriptive rather than a critical analysis of the examined studies. The critical evaluation of each work should consider:

•       Provenance -- what are the author’s credentials? Are the author’s arguments supported by evidence [e.g., primary historical material, case studies, narratives, statistics, recent scientific findings]?

•       Methodology -- were the techniques used to identify, gather, and analyze the data appropriate to addressing the research problem? Was the sample size appropriate? Were the results effectively interpreted and reported?

•       Objectivity -- is the author’s perspective even-handed or prejudicial? Is contrary data considered, or is certain pertinent information ignored to prove the author’s point?

•       Persuasiveness -- which of the author’s theses are most convincing or least convincing?

•       Value -- are the author’s arguments and conclusions convincing? Does the work ultimately contribute to an understanding of the subject in any significant way?

Also, create a narrative supporting the research gaps identified in the literature.

 

In the literature review and hypothesis development section the theoretical basis of hypothesis are missing. There is very significant literature on ESG, the authors need to update the literature and include recent published papers (2022-2023) and they need to discuss the research gaps and then they need to explain how the current paper fills at least one of these gaps. Consider following:

 

https://doi.org/10.1016/j.bir.2022.10.012 

https://doi.org/10.1016/j.bir.2022.08.011 

https://doi.org/10.1007/s11356-023-25345-6

 

What is the underlying theory that leads to the development of the hypotheses?  The authors need to enhance their hypotheses development by: (i) drawing on the theory; (ii) empirical literature; (iii) research setting/contextual insights; and (iv) then setting up their hypotheses. They will do this for each hypothesis. Currently, They have not developed your hypotheses in this way. They will need to so by drawing on both seminal (old) and recently (newly) published studies.

 

There needs to be a more comprehensive and formal discussion methodology used to conduct this study.Authors should include the controls for the board CEO attributes related variables for corporate governance.

 

The authors need to link their findings more strongly to the: (i) theory, (ii) empirics, (iii) context; and (iv) highlight their economic, academic/research and policy implications. In the discussion of the results please focus on the novel findings and insights vis-à-vis the existing literature.

 

In the conclusion, the authors need to expand the discussions relating to implications, limitations and avenues for future research.

Moderate editing of English language

Author Response

       Thank you a lot for the time you have given to our articles and the advice you have given. We have made some revisions to the article based on your suggestions and guidance, focusing on the following areas: Firstly, the introduction has been rewritten to make the article clearer. Secondly, the literature review and theoretical foundations have been revised to include more recent literature in order to ensure that the article is persuasive and up-to-date. In addition, we have added variables to the control variables group section to represent aspects of corporate governance, as you suggested. Finally, we have added a statement of the limitations of this paper and future research perspectives in the conclusion section. You can see the results of the specific changes in the Annex.

Author Response File: Author Response.pdf

Round 2

Reviewer 1 Report

The authors have addressed most of my concerns. However, please review the content at https://www.mdpi.com/authors/references and make necessary corrections to the in-text citations.

Still, many citations appear to be inaccurate. For instance, on page 4, the citation of "Xie Weimin et al. (2021)" is incorrect. Typically, it is sufficient to use the format "Xie et al. (2021)" for commonly-seen citations, rather than including the full name. Conduct a thorough review of all in-text citations to ensure their accuracy.

Author Response

       Thank you again for your review and feedback on the revisions we have submitted. In this minor revision, all the reviewers suggested that the references should be revised again, so we have critically checked and corrected the format and content of the references in response to your comments, in strict accordance with the reference style of the MDPI journal.

       At the same time, we have further checked the text writing and corrected a few typographical errors. The revised manuscript has been uploaded as an attachment and we hope that you will take the time to review it again. We hope that our changes will be approved by you and that we will be able to publish it in the SUSTAINABILITY journal. Thanks again！

Author Response File: Author Response.pdf

Reviewer 2 Report

Hello, 

The paper has improved substaiantially, However my comments are partially addressed, especially the related papers I suggested.

 

good luck 

 

Author Response

       Thank you again for your review and feedback on the revisions we have submitted. In this minor revision, all the reviewers suggested that the references should be revised again, so we have critically checked and corrected the format and content of the references in response to your comments, in strict accordance with the reference style of the MDPI journal.

       At the same time, we have further checked the text writing and corrected a few typographical errors. The revised manuscript has been uploaded as an attachment and we hope that you will take the time to review it again. We hope that our changes will be approved by you and that we will be able to publish it in the SUSTAINABILITY journal. Thanks again！

Author Response File: Author Response.pdf

Reviewer 3 Report

Thank you for incorporating the suggested changes. A minor issue observed is the referencing style, authors should recheck with journal guidelines. 

English is satisfactory.

Author Response

       Thank you again for your review and feedback on the revisions we have submitted. In this minor revision, all the reviewers suggested that the references should be revised again, so we have critically checked and corrected the format and content of the references in response to your comments, in strict accordance with the reference style of the MDPI journal.

       At the same time, we have further checked the text writing and corrected a few typographical errors. The revised manuscript has been uploaded as an attachment and we hope that you will take the time to review it again. We hope that our changes will be approved by you and that we will be able to publish it in the SUSTAINABILITY journal. Thanks again！

Author Response File: Author Response.pdf