Sustainability assurance and short-term debt for long-term investment: empirical evidence from Chinese listed companies

Short-term debt for long-term investment (SDFLI) threatens financial stability, yet whether sustainability assurance (SA) can curb it remains unclear. Using data on Chinese non-financial A-share listed firms from 2011 to 2023, this paper examines the effect of SA on SDFLI and its mechanisms. We find that SA mitigates SDFLI. This effect is stronger for firms with higher information asymmetry, whereas the evidence that it is also stronger among firms with poorer reputations remains tentative. SA alleviates SDFLI mainly by improving firms’ access to long-term debt financing, and the effect is more pronounced when firms face greater ESG rating divergence. Drawing on signalling and stakeholder theories, this study reveals the role of SA in curbing SDFLI and offers implications for preventing debt risks.