Does ESG rating policy reduce corporate risk-taking? Evidence from China

IF 4.8 2区经济学 Q1 BUSINESS, FINANCE

Pacific-Basin Finance Journal Pub Date : 2024-12-25 DOI:10.1016/j.pacfin.2024.102654

Shilei Wu , Fu-You Zhou , Deng-Kui Si , Jiawei Hao

引用次数: 0

Abstract

This paper investigates the impact of environmental, social, and governance (ESG) ratings on corporate risk-taking using non-financial listed firms from 2010 to 2020 in China. We find a significantly negative correlation between ESG ratings and corporate risk-taking, indicating that higher ESG ratings are associated with reduced corporate risk-taking behavior. The result remains held to address endogeneity concerns and various robustness checks. We identify the channels of reducing information asymmetry, enhancing investment efficiency, and improving trade credit through which ESG rating inhibits corporate risk-taking. Further analysis shows that the negative impact of ESG ratings on corporate risk-taking is more pronounced for firms with lower audit quality, voluntary ESG disclosures, and lower institutional ownership. This paper provides a novel theoretical view of the relationship between ESG ratings and corporate risk-taking.

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来源期刊

Pacific-Basin Finance Journal BUSINESS, FINANCE-

CiteScore

6.80

自引率

6.50%

发文量

157

期刊介绍： The Pacific-Basin Finance Journal is aimed at providing a specialized forum for the publication of academic research on capital markets of the Asia-Pacific countries. Primary emphasis will be placed on the highest quality empirical and theoretical research in the following areas: • Market Micro-structure; • Investment and Portfolio Management; • Theories of Market Equilibrium; • Valuation of Financial and Real Assets; • Behavior of Asset Prices in Financial Sectors; • Normative Theory of Financial Management; • Capital Markets of Development; • Market Mechanisms.