Greener pastures, steadier returns: ESG ratings and idiosyncratic risk management

IF 4.8 2区经济学 Q1 BUSINESS, FINANCE

International Review of Economics & Finance Pub Date : 2025-04-15 DOI:10.1016/j.iref.2025.104110

Miaomiao Tao , Boqiang Lin , Stephen Poletti , David Roubaud

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引用次数: 0

Abstract

Understanding China's Environmental, Social, and Governance (ESG) dynamics is crucial, given the nation's swiftly changing regulatory landscape, varied industry sectors, and significant global market impact. We validate the connection between ESG ratings and idiosyncratic volatility that the three-factor model gauges. Our model underscores that ESG ratings are instrumental in mitigating idiosyncratic volatility at the firm level. However, the associated effects vary by firm attributes, industry sectors, pollution levels, and regions. The moderation analysis reveals that investor sentiment, economic policy uncertainty, and financial constraints are critical thresholds affecting the connection between ESG ratings and corporate idiosyncratic volatility. Specifically, when economic policy uncertainty and financial constraints surpass certain thresholds, the mitigating effect of ESG ratings on idiosyncratic volatility diminishes. These findings are invaluable for stakeholders dealing with the complexities of ESG investments and sustainable business practices in a rapidly evolving global context.

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更绿的牧场，更稳定的回报：ESG评级和特殊风险管理

考虑到中国瞬息万变的监管格局、不同的行业部门和重大的全球市场影响，了解中国的环境、社会和治理（ESG）动态至关重要。我们验证了ESG评级与三因素模型衡量的特殊波动率之间的联系。我们的模型强调，ESG评级在减轻公司层面的特殊波动方面发挥了重要作用。然而，相关影响因公司属性、行业部门、污染水平和地区而异。适度分析表明，投资者情绪、经济政策不确定性和金融约束是影响ESG评级与公司特质波动之间关系的关键阈值。具体而言，当经济政策不确定性和金融约束超过一定阈值时，ESG评级对特殊波动性的缓解作用减弱。这些发现对于利益相关者在快速发展的全球背景下处理ESG投资和可持续商业实践的复杂性具有宝贵的价值。

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来源期刊

International Review of Economics & Finance Multiple-

CiteScore

7.30

自引率

2.20%

发文量

253

期刊介绍： The International Review of Economics & Finance (IREF) is a scholarly journal devoted to the publication of high quality theoretical and empirical articles in all areas of international economics, macroeconomics and financial economics. Contributions that facilitate the communications between the real and the financial sectors of the economy are of particular interest.