ESG Rating and Stock Price Crash Risk Evidence from China

ESG Rating and Stock Price Crash Risk Evidence from China

Xiao Liqiang

(Fuzhou University of International Studies and Trade )

 Abstract

Corporate environment, social responsibility and corporate governance (ESG) are increasingly concerned by investors, and ESG theme investment is developing rapidly. This study uses a-share listed companies from 2009 to 2020 as research samples to investigate the relationship between ESG rating and stock price crash risk, and further explores the heterogeneous impact of ESG rating on stock price crash risk under different ownership nature. The empirical results show that there is a significant negative correlation between ESG rating and stock price crash risk. Further analysis shows that the improvement of ESG rating has a significant effect on reducing the risk of stock price collapse of non-state-owned enterprises, and the degree is higher than the average level. However, the stock price collapse risk of state-owned enterprises is not significantly affected by ESG rating. This indicates that the mitigation effects of corporate performance in environment, social responsibility and corporate governance on stock price crash risk are different among enterprises of different nature. The possible reason is that the credit rating of non-state-owned enterprises is usually lower than that of state-owned enterprises, and investors are more sensitive to their risks. To some extent, ESG rating can be used as an indicator to judge the continuity and stability of enterprises’ future operations, and investors will pay attention to it. However, due to the equity nature of state-owned enterprises, investors will have more confidence in the safety of their operations, so they will not pay enough attention to ESG rating. This study helps clarify the economic impact of ESG performance and provides empirical evidence for listed companies to attach importance to and improve ESG performance.

 

Keywords：ESG rating;  stock price crash risk;  sustainable investment