The spillover effect of macroprudential policies on firm’s ESG performance: evidence from a quantile regression analysis

This paper examines the spillover effects of macroprudential policies on firms’ ESG performance in China. Using panel data on Chinese A-share listed firms from 2009 to 2023 and unconditional quantile regressions, we find that macroprudential tightening improves ESG performance at lower quantiles, but this effect declines across the ESG distribution and turns negative at the upper tail. Mechanism analysis supports the bank-financing channel: tighter macroprudential policies reduce firms’ bank financing, while stronger ESG performance helps mitigate this deterioration. Decomposing ESG shows that the overall response is mainly driven by improvements in environmental and social performance, alongside weaker governance performance. Additional analysis suggests stronger ESG responses among bank-dependent and financially constrained firms, but weaker responses among state-owned firms. These findings reveal an unintended ESG-related spillover of macroprudential regulation and are consistent with stakeholder theory, signalling theory, and cost-benefit explanations of ESG engagement.