Based on signaling theory, good ESGP can send positive signals to the market. The public usually believes that firms with good ESGP have efficient corporate governance and less risk of non-compliance (Gao et al., 2017). For external stakeholders, in order to reduce their investment risks and protect their own interests, they will tend to invest more resources in companies with better ESGP under limited resource allocation. As a result, good ESGP signals to the market that firms are focused on environmental protection, actively fulfilling their social responsibilities and improving corporate governance (Albuquerque et al., 2019). This helps firms to build good social relationships with different stakeholders and is crucial for enhancing corporate risk-taking (Lins et al., 2017).

According to information asymmetry theory, the information gap between shareholders and managers was inevitable before the emergence of ESG. Financial data could not provide shareholders with a comprehensive understanding of a company's operations, which could easily lead to trust issues between shareholders and managers. The non-financial information contained in ESGP can alleviate the information asymmetry, which reduces the risk premium demanded by investors and creditors (Drempetic et al., 2020), and also inhibits the risk aversion tendency of managers to a certain extent (Wang H. J. et al., 2024).

From a resource acquisition perspective, firms with strong ESGP have a resource pooling effect. It helps firms to acquire multiple resources from different stakeholders, increasing the capacity of the “resource pool” within the firm (Pedersen et al., 2021). These resources form a buffer in times of crisis, which in turn improves the firm's ability to survive and grow in the event of external shocks, and increases the level of CRT (Vial, 2019). By publicizing the fulfillment of their ESG responsibilities, companies balance financial returns and social benefits, which helps to increase shareholder value and gain stakeholder support (Zhang et al., 2010), and provides companies with the capital to take high risks.

Active corporate ESGP can help mitigate the problem of over-investment and under-investment caused by environmental uncertainty and play a protective role for stable business operations (Samet and Jarboui, 2017). At the same time, it can help companies establish a good relationship with local governments. This is conducive to obtaining government support in terms of funding, policies, etc., to mitigate the impact of environmental uncertainty on enterprises' business operations.

H1

Corporate ESGP may enhance CRT.

The traditional trade-off hypothesis posits that companies' environmental protection initiatives may adversely affect their financial performance due to the additional costs incurred, with the potential economic benefits of improved environmental performance not fully offsetting these costs. In China, the externalities of pollution remain largely uninternalized (Liu et al., 2022), requiring firms to make significant investments in green innovation, energy conservation and emissions reduction efforts. These investments increase business risks, potentially threatening the survival of companies. In addition, environmental performance constraints limit polluting companies' access to credit resources, hindering their ability to secure external financial support (Zhao et al., 2024). In Iran, the relationship between companies' environmental performance and CRT is even more pronounced, with the former having a direct dampening effect on the latter (Khairollahi et al., 2016). Therefore, the following hypothesis is derived:

H2

Environmental performance may inhibit CRT.

Stakeholder theory suggests that investing in social responsibility performance increases shareholder wealth because it increases the willingness of other stakeholders to provide resources to the company (Freeman, 1984). In addition, social responsibility contributes to the firm's reputation for keeping its implicit promises, which improves the firm's relationship with its stakeholders (Harjoto and Laksmana, 2018). Therefore, social responsibility improves the level of corporate risk-taking by managing the interests of both invested (shareholders) and non-invested stakeholders (employees, customers, etc.). According to risk management theory, social responsibility performance creates “moral capital” for the firm, which provides protection and mitigates negative comments from stakeholders (Godfrey et al., 2009), leading to higher risk-taking (Chakraborty et al., 2019). Therefore, the following hypothesis is derived:

H3

Social responsibility performance may enhance CRT.

Management serves as the primary decision-maker in CRT endeavors. With the objective of maximizing corporate value, management makes risky investment decisions tailored to their individual risk appetites, aiming to achieve efficient allocation of corporate resources (Zhang et al., 2021; Nakano and Nguyen, 2012). For example, during financial crises, insurance industry firms with better governance structures have been observed to mitigate tail risks and expected loss probabilities, thereby fostering a more aggressive CRT stance (Magee et al., 2019). For external investors and stakeholders, the level of corporate governance provides a crucial insight into a firm's legitimacy and reputation. Improvements in corporate governance play a pivotal role in enabling firms to gain strategic advantages and outperform their competitors (Wang et al., 2023). In addition, public disclosure of corporate governance standards by firms can help governments reduce the costs associated with screening firms, increase the likelihood that such firms will be included in government support programs, and ultimately increase their CRT capacity. Based on existing research, we can formulate the hypothesis that:

H4

Corporate governance performance may enhance CRT.

Several studies have found that equity concentration plays a key role in shaping the relationship between ESGP and CRT. Firstly, higher equity concentration hinders information exchange between companies, exacerbating information asymmetry and increasing transaction costs (Liu et al., 2024). This, in turn, enhances companies' propensity to engage in risky activities (Wang S. J. et al., 2024; Massa and Zaldokas, 2017; Faccio et al., 2016). Secondly, a high degree of equity concentration implies that minority shareholders have disproportionate decision-making power. This concentration of power may lead to decisions that are not well-hedged against firm risk, as decisions may be heavily influenced by minority preferences and experience (Harford et al., 2018). The following hypothesis is therefore proposed:

H5a

Equity concentration operates a moderating role in the relationship between ESGP and CRT, and the effect of ESGP is more pronounced at lower levels of equity concentration.

ESGP has the potential to reduce their risk appetite by encouraging entrepreneurship and innovation. Proactive disclosure of environmental information by companies not only helps to maintain a positive corporate image, but also provides incentives to phase out energy-intensive and polluting technologies, thereby stimulating technological innovation (Al Amosh and Khatib, 2023). In addition, ESGP signifies a commitment to social responsibility, which increases investor confidence and reduces the cost of corporate innovation (Wang H. J. et al., 2024). An increase in the level of technological innovation is conducive to maintaining a leading edge and establishing a favorable market position, which increases the level of CRT (Vilanova et al., 2009). Therefore, we propose the following hypothesis:

H5b

ESGP may effectively enhance CRT by stimulating innovation.

The higher the shareholding of institutional investors in a company, the more the company is inclined to take higher risks. Some studies have shown that institutional investors have a higher preference for companies with high information transparency and sustainable development capability, and stocks of listed companies with good ESGP are more likely to be favored by institutional investors. When institutional investors hold shares in target companies as an important external governance mechanism, they can play a better role in monitoring target companies as their shareholding increases. This improves corporate governance, mitigates the free-rider problem, and helps firms to further improve their own risk-taking (Hao et al., 2020; Ongsakul et al., 2022). Therefore, the following hypotheses are proposed:

H5c

Corporate ESGP may enhance CRT by increasing institutional investor shareholdings.

CRT plays a key role in corporate strategic decision-making, reflecting a company's willingness and ability to pay higher returns in pursuit of higher earnings. Referring to the method proposed by Sitkin and Pablo (1992), we measure CRT as the ratio of a firm's risk assets to its total assets in the current year. This represents a series of CRT decisions and is an external manifestation of a company's risk appetite (Hanelt et al., 2021). A stronger willingness to take risks by the company leads to higher CRT levels as a consequence of its decision-making behavior.

The Sino-Securities ESG evaluation system not only covers all A-shares, but also uses technical means to track the historical data since 2009, which makes the data more comprehensive and relevant to the Chinese market. Based on this, we select the score of total ESGP, score of EP, score of SP and score of GP in the Sino-Securities ESG evaluation system as the independent variables in this study.

Existing research has shown that various factors, such as corporate value and nature, affect CRT. Therefore, the following control variables are established: firm size (Scale), price-earnings ratio (PE), gearing ratio (Lev), firm free cash flow per share (FCFF), firm age (Age) and firm growth (Growth) (Zhang et al., 2024; Chen et al., 2024).

As ESG is a product of social progress at a certain stage, its performance outcomes can vary due to its unique attributes. Based on this, the following moderating variable is selected for further study: equity concentration (CR1) (Wang S. J. et al., 2024).

To further study the mechanism by which ESGP affects CRT, mediating variables are introduced: corporate innovation level (EI) (Qian et al., 2023) and institutional investor shareholding (IIP) (Wang and Wang, 2024). As detailed in Table 1.

The data sample selected for this study is comprised of publicly available data for Type A companies listed on the Shanghai and Shenzhen stock exchanges from 2009 to 2022. The data encompasses both A-share markets, objectively and accurately reflecting the operational status of public companies in these markets. Following the exclusion of financial companies, ST companies and those with missing data on key variables, the continuous financial data were trimmed to 1 and 99%. After the aforementioned data processing steps, a total of 23,146 data samples of A-share listed companies were obtained for the study. The data employed in this study are derived from the CSI ESG scoring system and the CSMAR database. The basic regression model employed to test the hypotheses is presented in Equation 1.

Furthermore, it should be noted that the impacts of EP, SP and GP are operating simultaneously and interacting to influence business. Therefore, we also constructed the baseline regression model of the impact of individual components of ESGP on CRT, which is set up in Equation 2.

Table 2 shows the descriptive statistics of the main variables of this study. A statistical analysis of the data reveals the following observations for the 23,146 sample points: Firstly, the difference in the level of corporate risk-taking between Shanghai and Shenzhen A-share listed companies is relatively small. Second, the difference in the comprehensive ESG performance of each company is relatively significant. Finally, most companies in the sample have relatively low environmental performance scores. Social responsibility performance scores are relatively high, indicating that listed companies contribute more positively to social welfare. In addition, corporate governance performance scores are also relatively high.

Table 3 illustrates the baseline regression model examining the influence of ESGP on CRT. Column (1) of Table 3 demonstrates that the regression coefficient of corporate ESGP is 0.0009 and is significant at the 1% level. The results show that there is a facilitating effect of corporate ESGP on CRT, and hypothesis H1 is verified. The improvement of corporate ESGP releases positive signals to the public, improves information asymmetry, and can effectively inhibit managers' risk aversion. At the same time, good ESGP is more conducive to the acquisition of resources and the establishment of a good reputation image, which in turn improves CRT.

Column (2) of Table 3 presents the findings of the primary regression analysis for each component of ESGP. The regression coefficient for Escore is negative and statistically significant at the 1% level, thereby supporting hypothesis H2. The regression coefficient for Sscore is positive and significant at the 1% level, thereby supporting H3. The regression coefficient for Gscore is positive and significant at the 1% level, thereby supporting H4. From the above results, it can be concluded that the improvement of environmental performance inhibits the CRT, while the improvement of social responsibility performance and governance performance can increase the level of CRT.

This study examines the moderating effect of equity concentration (CR1) on the relationship between corporate ESGP and CRT capability. The results of the moderation test are shown in Table 8. It indicates that the lower the equity concentration, the greater the contribution of ESGP to CRT, which verifies the hypothesis H5a.

The above research indicates that the improvement in corporate ESGP has a facilitating effect on CRT. This impact mechanism might involve several intermediary mechanisms. To investigate whether the degree of corporate financing restricts and the level of corporate innovation are among these intermediary mechanisms, relevant tests were conducted.