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The impact of ESG ratings on firm risks in Taiwan's market

Author

Listed:
  • Chang, Shun-Fen
  • Chen, Bai-Sian
  • Chen, Hong-Yi
  • Chen, Hsiao-Yin

Abstract

This study investigates the impact of a firm's ESG achievements on various dimensions of firm risk, including financial risks, stock price crash risks, and financial constraints. Empirical evidence reveals a negative association between ESG scores and financial risks, as well as financial constraints, indicating that higher ESG performance contributes to lower overall firm risk. The reduction in crash risks becomes particularly evident during the COVID-19 crisis, highlighting the protective role of ESG engagement in times of market stress. These findings suggest that strategic investment in ESG activities enhances a firm's resilience and stability during both normal and adverse conditions.

Suggested Citation

  • Chang, Shun-Fen & Chen, Bai-Sian & Chen, Hong-Yi & Chen, Hsiao-Yin, 2025. "The impact of ESG ratings on firm risks in Taiwan's market," Pacific-Basin Finance Journal, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001568
    DOI: 10.1016/j.pacfin.2025.102819
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    More about this item

    Keywords

    Crash risk; ESG; Financial constraint; Financial risk;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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