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The ESG rating, spillover of ESG ratings, and stock return: Evidence from Chinese listed firms

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Listed:
  • Li, Hao
  • Guo, Hui
  • Hao, Xinyao
  • Zhang, Xuan

Abstract

In line with the increasing concern about climate change and the Chinese government's goal of achieving carbon peaking and carbon neutrality (known as the “Double Carbon” policy), Chinese corporations and investors are shifting their strategies towards sustainable investing. This paper investigates the spillovers of ESG ratings from other firms in the same locations and their impact on stock performance. We use the dataset of Chinese listed firms in the A-share financial market from Jan 2015 to May 2022. Our results show that firms face peer pressure from other firms' ESG ratings in the same location, and stock return is negatively related to ESG ratings. Our results are robust to different ESG rating methods and the sample of non-zombie listed firms. We also find that ESG ratings of listed firms in China are more likely to impact the stock return of non-manufacturing firms, non-SOE firms, and firms that are not located in province-level cities.

Suggested Citation

  • Li, Hao & Guo, Hui & Hao, Xinyao & Zhang, Xuan, 2023. "The ESG rating, spillover of ESG ratings, and stock return: Evidence from Chinese listed firms," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001622
    DOI: 10.1016/j.pacfin.2023.102091
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    Cited by:

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    2. Kelvin Lee Yong Ming & Yamunah Vaicondam & Amira Mas Ayu Amir Mustafa & Siti Nurul Munawwarah Roslan & Shen Yi & Komal Chopra & Pooja Khanna, 2024. "ESG Integration and Financial Performance: Evidence from Malaysia’s Leading Companies," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 487-494, September.
    3. Wu, Yanran & Zhou, Riwang & Zhang, Chao, 2024. "Size and ESG premiums: Evidence from Chinese A-share market," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
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    5. Ma, Ning & Ma, Xue, 2024. "Does the ESG rating promote common prosperity within enterprises?," Finance Research Letters, Elsevier, vol. 69(PA).
    6. Wenrui Zhang & Olga Biryukova, 2025. "ESG Performance of Chinese Listed Enterprises Participating in the Belt and Road Initiative," Sustainability, MDPI, vol. 17(6), pages 1-22, March.

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    More about this item

    Keywords

    ESG; Stock return; ESG spillover;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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