Financial Flexibility and Corporate Sustainable Development Performance: Evidence from Chinese Firms and the Roles of Innovation, Environmental Governance, and Corporate Social Responsibility

With the rapid transformation of China’s economy toward high-quality development, sustainable development has become a key objective for Chinese enterprises. In this context, financial flexibility has emerged as an important strategic capability that enables firms to respond to environmental uncertainty while supporting long-term sustainability initiatives. Based on evidence and insights from Chinese listed firms, this study explores the relationship between financial flexibility and corporate sustainable development performance. Specifically, the paper examines how financial flexibility supports sustainability through three key mechanisms: innovation investment, environmental governance practices, and corporate social responsibility engagement. Furthermore, the moderating roles of governance mechanisms, including directors’ and officers’ liability insurance and media attention, are analyzed. The analysis suggests that financial flexibility plays a crucial role in enhancing the sustainable development performance of Chinese firms by providing financial resources for long-term strategic investments. The findings offer valuable implications for corporate financial management and sustainability strategies in emerging economies such as China.