The Impact of ESG Ratings on Stock Liquidity Risk: Evidence from the Chinese Market
In recent years, environmental, social, and governance (ESG) has gradually become a hot topic to which Chinese society attaches great importance. This research investigated the influence of ESG rating on Chinese listed firms’ stock liquidity from 2015 to 2019 by collecting their daily stock price, trading volume, and annual indicators used to measure performance and firm characteristics, such as return on asset and market value. By dividing companies into high- and low-ESG companies, we find that high or low ESG has no significant effect on stock liquidity risk. Using year-fixed effect analysis on various industries, we find that ESG rating results significantly negatively impact stock liquidity risk for agriculture and other industries. In addition, the mitigating effect of ESG on stock liquidity risk is more potent for smaller firms than larger ones. This study guides listed firms to make decision-makings and weigh the importance of social contribution.
Review of Integrative Business and Economics Research
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Liang, Yue; Xue, Chunxiao; and Zhang, Jianing, "The Impact of ESG Ratings on Stock Liquidity Risk: Evidence from the Chinese Market" (2022). Kean Publications. 668.