Does Fintech Development Enhance Corporate ESG Performance? Evidence from an Emerging Market

The effectiveness of environmental, social, and governance (ESG) has been widely discussed and is often linked to corporate sustainability strategies. However, corporate ESG performance cannot be achieved without the support of financial development and the underlying mechanisms through which fintech development affects corporate ESG performance in emerging markets remain unexplored. Firms that are less financially constrained exhibit higher ESG performance in cities with better developed fintech. Moreover, the results remain robust after addressing the endogeneity between fintech development and ESG performance and using different city-level fintech indexes. Additionally, the results remain robust after addressing the endogeneity between fintech development and ESG performance and using different model specifications and variable measurement. Heterogeneity analysis suggests that the effect of fintech development on ESG performance is stronger for firms that are small, operate in technology industries, and have financial executives. These findings provide new insights into the role of fintech development in promoting sustainable social and economic development.