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Effect of ESG performance on stock price crash risk: evidence from China

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  • Hanxiao Zhang
  • Lian Kee Phua

Abstract

This study investigates the impact of ESG performance on stock price crash risk using a dataset of Chinese-listed firms in the period 2015 – 2020. Empirical evidence reveals a negative association between ESG performance and stock price crash risk, particularly under high product market competition conditions. Mechanism analysis suggests that ESG performance reduces stock price crash risk by alleviating maturity mismatch and optimizing debt maturity in investment and financing, but only when market competition is intense. These findings align with the resource dependence theory, indicating that strong ESG performance enhances a firm’s ability to acquire resources and mitigate stock price crash risk in highly competitive environments. Consequently, ESG performance not only augments a firm’s competitive advantage but also serves as a risk reduction tool, enabling investors to construct more sustainable investment portfolios.

Suggested Citation

  • Hanxiao Zhang & Lian Kee Phua, 2025. "Effect of ESG performance on stock price crash risk: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 57(51), pages 8587-8611, November.
    • Handle: RePEc:taf:applec:v:57:y:2025:i:51:p:8587-8611
    DOI: 10.1080/00036846.2024.2400382
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