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Do ESG rating changes matter? Evidence from Chinese stock market

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  • Liu, Dianhao
  • Zhou, Jun

Abstract

Investors will change their trading behavior in response to ESG rating changes, which in turn influence stock returns. In this paper, we examine the impact of ESG rating changes on stock returns in Chinese stock market. We find that ESG rating upgrades (downgrades) lead to higher (lower) short-term stock returns. A long-short portfolio constructed from upgraded firms versus downgraded firms generates monthly abnormal returns of 1.80 % on average. The main driver is institutional investors' buying (selling) shares of companies with upgraded (downgraded) ESG ratings. The disagreement about ESG rating changes can undermine this impact.

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  • Liu, Dianhao & Zhou, Jun, 2025. "Do ESG rating changes matter? Evidence from Chinese stock market," Global Finance Journal, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325001073
    DOI: 10.1016/j.gfj.2025.101180
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