How do environmental, social, and governance factors impact entrepreneurial finance? Evidence from the European small and medium enterprises
研究了欧洲中小企业ESG表现对私募股权融资的影响，发现整体ESG得分及环境、治理维度显著吸引投资，而社会维度影响不显著。
Purpose This study examines the impact of environmental, social and governance (ESG) performance on private equity financing in European Small and Medium Enterprises (SMEs). It specifically explores the impact of aggregated ESG scores and individual environmental, social and governance dimensions on private equity investment decisions. Design/methodology/approach The analysis employs fixed-effects panel regressions using a dataset of European SMEs from 2015 to 2023. The study assesses the relationships between private equity involvement, ESG scores and individual ESG sub-components while controlling for firm-specific financial attributes and macroeconomic factors. Findings Results indicate that SMEs with higher aggregated ESG scores attract significantly greater private equity investment. Specifically, environmental and governance sub-components have a positive and significant impact on investment decisions, signaling investor preferences for ecological risk management, regulatory compliance and corporate transparency. Conversely, the social dimension lacks a significant effect, highlighting less emphasis on social sustainability factors by private equity investors. Additionally, macroeconomic conditions, liquidity and sales growth have a positive influence on private equity financing, whereas country-level emissions have a negative impact on investment flows. Research limitations/implications The findings indicate the importance of embedding comprehensive ESG frameworks into SME financing strategies. Future research should investigate sector-specific differences and the impact of regulatory changes on investor behavior toward ESG criteria. Practical implications The study offers practical insights for entrepreneurs and policymakers, suggesting an enhanced emphasis on environmental and governance practices to attract private equity. Policymakers are recommended to incentivize ESG adoption among SMEs through targeted financial incentives, regulatory simplification and supportive sustainability-focused policies. Originality/value This research addresses a significant gap in entrepreneurial finance literature by empirically linking distinct ESG dimensions to private equity financing within European SMEs. The findings highlight the strategic benefits for SMEs that adopt robust ESG practices in attracting external finance and achieving long-term resilience.