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ESG rating and stock price crash risk: Evidence from China

Author

Listed:
  • Feng, Jingwen
  • Goodell, John W.
  • Shen, Dehua

Abstract

While several studies evidence that firm social responsibility lowers stock crash risk, few investigate this for China. Further, few studies investigate the aggregate role of environmental, social, and corporate governance responsibilities, rather than just social responsibility alone. Additionally, unlike previous studies, we consider both stakeholder and agency explanations. We investigate the relationships between environmental, social, and corporate governance (ESG) ratings and stock price crash risk, finding a statistically and economically significant negative relationship for Chinese firms. Results are consistent with agency-theory based explanations. Results will be of interest to scholars interested in the general impact of promotion of public goods on firm performance, as well as to researchers and investors interested in the Chinese institutional environment.

Suggested Citation

  • Feng, Jingwen & Goodell, John W. & Shen, Dehua, 2022. "ESG rating and stock price crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004566
    DOI: 10.1016/j.frl.2021.102476
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock price crash risk; ESG evaluation; Market capitalization; Sustainable investment;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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