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News-based ESG sentiment and stock price crash risk

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  • Yu, Haixu
  • Liang, Chuanyu
  • Liu, Zhaohua
  • Wang, He

Abstract

From the perspective of ESG news-based sentiment, we examine the impact of ESG performance on stock price crash risk. This paper constructs a sentiment index based on ESG news to measure public opinion of listed firms. First, there is a significant negative relationship between ESG news sentiment and stock price crash risk, indicating that higher ESG news sentiment can reduce the crash risk. Second, heterogeneity analysis demonstrates that ESG sentiment has a greater impact on crash risk reduction for firms with lower analyst coverage, lower information transparency, voluntary ESG information disclosure and non-state-owned. In addition, mechanism tests indicate that ESG sentiment affects stock price crash risk by reducing negative ESG incidents, information asymmetry, and agency costs. This paper examines the research inference that ESG news sentiment is beneficial in reducing stock price crash risk and expands the research on the governance mechanism of stock price crash risk.

Suggested Citation

  • Yu, Haixu & Liang, Chuanyu & Liu, Zhaohua & Wang, He, 2023. "News-based ESG sentiment and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finana:v:88:y:2023:i:c:s105752192300162x
    DOI: 10.1016/j.irfa.2023.102646
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