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How does ESG rating uncertainty affect stock price crash risk? Evidence from China

Author

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  • Li, Hui-Jun
  • Si, Deng-Kui
  • Wu, Shi-Lei

Abstract

This study examines the nexus between ESG rating uncertainty and stock price crash risk using a sample of A-share listed firms from 2009 to 2023. The results demonstrate that ESG ratings uncertainty significantly increases the firms' stock price crashes. After addressing endogeneity issues and performing rigorous robustness tests, the findings remain consistent. Channel analyses reveal that ESG rating uncertainty exacerbates stock price crash risk by elevating corporate financing cost, increasing managerial myopia, and amplifying information asymmetry. Heterogeneity analyses further indicate that the intensification effect is more pronounced among firms with low production efficiency, high financing constraints, and lower corporate governance efficiency. These findings contribute to the literature by elucidating the role of ESG rating uncertainty in shaping investor behavior and identifying novel determinants of stock price crash risk.

Suggested Citation

  • Li, Hui-Jun & Si, Deng-Kui & Wu, Shi-Lei, 2026. "How does ESG rating uncertainty affect stock price crash risk? Evidence from China," Economic Modelling, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:ecmode:v:159:y:2026:i:c:s0264999326000891
    DOI: 10.1016/j.econmod.2026.107560
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • O35 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Social Innovation

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