Research On The Impact Of ESG Performance Of Commercial Banks On Liquidity Creation

The natural environment has been deteriorating since industrialization,which has imposed lots of adverse effects on economic development and human survival.To achieve high-quality economic development,China has adhered to the strategy of green and sustainable development,and put forward the goal of "carbon peak,carbon neutral",and called on enterprises to assume ESG responsibilities in daily operations.On the other hand,the phenomenon of "debt shortage" and "asset shortage" caused by the liquidity problems in China has alternated in recent years,which not only increases the systemic financial risk in China,but also seriously dameges the liquidity creation function of commercial banks.In this context,whether commercial banks,as the pivot of resources allocation,can influence liquidity creation by undertaking ESG responsibilities,is of great significance in many aspects to promote high-quality economic development.Therefore,this paper poses the following questions: Does the ESG performance of commercial banks improve liquidity creation? Which ESG sub-items are playing a role? What are the mechanisms? Is there any difference in the degree to which the liquidity creation of banks with different bank-level characteristics is affected by ESG performance?Under the background of increasingly violent macroeconomic fluctuations,has the prosperity of banking industry played a moderating role? Is there any structural difference in the impact of ESG performance on liquidity creation under different levels of liquidity creation?To answer these questions,this paper has carried out research from both theoretical and empirical aspects.Firstly,based on the related theories and the existing literatures,this paper analyzes the impact of ESG performance on liquidity creation and its mechanisms theoretically,and puts forward a series of hypotheses to be tested.Secondly,this paper uses the quarterly data of 41 A-share listed commercial banks in China from 2008 to 2022,empirically tests the hypothesis put forward above and makes further discussions,and the following conclusions are drawn:(1)ESG performance of banks has a significant positive impact on overall liquidity creation,asset-side liquidity creation and debt-side liquidity creation;From the perspective of ESG sub-items,the governance dimension is the key factor affecting liquidity creation,followed by the social dimension;(2)The mechanism analysis indicates that the enhancement of operating efficiency and risk taking are two important mechanisms for commercial banks’ ESG performance to affect liquidity creation;(3)Heterogeneity analysis shows that the effect of commercial banks’ ESG performance on liquidity creation weakens in sequence among local banks,national joint-stock banks,and the five major state-owned banks,and it’s suppressed in banks with sufficient capital and strong reliance on inter-bank business;(4)During the boom period of the banking industry,the ESG performance of banks has a more significant effect on liquidity creation;(5)Via quantile regression model,it is found that with the improvement of liquidity creation,the impact of ESG performance on liquidity creation will gradually weaken.Finally,according to the conclusions of the research,this paper puts forward some policy recommendations from the perspectives of government authority and commercial banks.The main contributions of this paper are as follows: It establishes a connection between ESG of bank industry and liquidity creation with revealing the mechanisms,and it explores the heterogeneity under different bank characteristics and the moderating role of bank industry prosperity,as well as the curve of bank ESG performance’s marginal impact on liquidity creation under different levels of liquidity creation,which enriches the theoretical frameworks and research results in the relevant fields.