The impact of ESG on corporate financialization: Evidence from energy sector firms

Abstract

In the context of the green transition and increasing demands for ESG- especially in the energy sector- understanding the impact of ESG on corporate financial strategy has become critically important. This study investigates the relationship between ESG factors (Environmental, Social, Governance) and corporate financialization in 50 listed Vietnam energy companies during 2014- 2023. Findings show that social factors positively impact financialization, environmental factors have a negative effect, and governance factors are insignificant. Cash flow from operations influences financialization but is not a key mediator in the ESG- financialization relationship. The study contributes by separately analyzing each ESG pillar and testing the mediating role of cash flow within the context of an emerging market. It proposes several recommendations: controlling the structure of financial assets, linking ESG incentives to real investments, improving the legal framework, and enhancing monitoring quality from investors.