The sustainable development of the digital economy has attracted wide attention. To ex-plore how to improve the operational performance of China's digital firms, this paper conducts an influence mechanism model to test the nonlinear effect, ...

As an important fiscal policy of local governments, local government borrowing has an increasingly prominent impact on micro-enterprises. However, there is still a lack of effective verification on whether local government debt (LGD) will affect the Environmental, Social, and Corporate Governance (ESG) performance of enterprises. This paper uses micro data of Chinese listed companies from 2011 to 2020 and LGD data at the prefecture-level city layer to test the impact and mechanism of the expansion of LGD on corporate ESG performance by establishing panel regression models and mediating effect models. The results show that the expansion of LGD significantly reduces the ESG performance of local enterprises and presents a long-term inhibitory effect. The mechanism analysis indicates that the expansion of LGD suppresses corporate ESG performance by crowding out corporate credit resources, reducing government fiscal subsidies to enterprises, thereby worsening corporate cash flow. Furthermore, the negative impact of LGD expansion on corporate ESG performance is more pronounced in non-state-owned enterprises, those with high leverage, high industry competition, high technological intensity, low marketization, and low financial development levels. Furthermore, the expansion of LGD mainly reduces corporate social and environmental responsibility but has no significant impact on internal governance. The inhibitory effect of LGD on ESG is not caused by publicly issued urban investment bonds but stems from non-publicly issued debts. This paper extends the research on the microeconomic consequences of LGD to the field of corporate ESG, providing insights for comprehensively assessing the risks of LGD and promoting the construction of corporate ESG.

As a way for the government to integrate funds and make up for fiscal deficits, bond issuance plays an important role in environmental governance and thus impacts environmental quality. Based on the panel data of 30 provinces in China from 2011 to 2019, this study utilizes spatial econometric and threshold panel models to investigate the influence of local government debt on environmental pollution. The empirical results are as follows: 1) Both environmental pollution and local government debt have a significant positive spatial agglomeration effect. 2) The relationship between local government debt and environmental pollution presents a nonlinear U-shaped curve. Specifically, when the debt scale is less than the threshold value, local government debt plays a role in restraining environmental pollution, and when the debt scale exceeds the threshold value, the influence of local government debt on environmental pollution plays a promoting role. 3) A regional heterogeneity test suggests that in the eastern region, the influence of local government debt on environmental pollution is always restraining, while in the central and western regions, this influence is consistent with the national level, showing a U-shaped feature. This study provides a reference for policy-makers in improving environmental quality from the perspective of local government debt. Policy-makers should keep the scale of government debt within a moderate range to avoid the deterioration of environmental quality caused by excessive debt.