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How do firms react to ESG news-based sentiment? A corporate risk-taking perspective

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  • Zhuang, Pengtao
  • He, Qing
  • Ju, Wangjing
  • Xia, Qin

Abstract

This study investigates how firms respond to ESG news-based sentiment from the perspective of corporate risk-taking. Our findings reveal a significant negative relationship between ESG news sentiment and corporate risk-taking. Mechanism analyses reveal two primary transmission channels—reputational pressure and information obfuscation—through which heightened sentiment intensifies managerial risk aversion. Among the three ESG dimensions, governance-related sentiment has the strongest dampening effect on risk-taking. Heterogeneity analyses show that this negative impact is more pronounced in firms with lower third-party ESG ratings, weaker managerial ownership, and limited analyst coverage. These findings highlight the role of both external ESG information intermediaries and strong internal governance in moderating the influence of ESG news sentiment. However, the dampening effect of ESG news sentiment on risk-taking poses significant challenges to the long-term growth of corporate value.

Suggested Citation

  • Zhuang, Pengtao & He, Qing & Ju, Wangjing & Xia, Qin, 2025. "How do firms react to ESG news-based sentiment? A corporate risk-taking perspective," Research in International Business and Finance, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:riibaf:v:78:y:2025:i:c:s0275531925002879
    DOI: 10.1016/j.ribaf.2025.103031
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