SDG Registration and Firm Performance in Japanese Construction: Evidence From Propensity Score Matching and Difference‐in‐Differences

ABSTRACT This study examines whether voluntary Sustainable Development Goals (SDG) registration by small and medium‐sized enterprise contractors affects firm performance primarily through financing conditions and human capital acquisition rather than short‐term profitability in Japan's local construction industry. Using voluntary enrollment in the Nagano Prefecture SDGs Promotion Company Registration System as a quasi‐experiment, two‐period panel data for 2395 contractors (FY2018 and FY2021) are analyzed. Logit analysis reveals that firm size is the primary predictor of registration, implying self‐selection; treatment effects are then estimated using propensity score matching with difference‐in‐differences. SDG registration significantly reduces the net interest expense ratio by 0.277 percentage points and significantly increases the probability of hiring young technical employees by 25.4 percentage points. The equity ratio improves marginally by 11.2 percentage points, while short‐term profitability shows no significant change. Results suggest SDG registration affects firm performance through financing and human capital channels rather than near‐term earnings, contributing evidence on debt financing in relationship banking contexts.