Study On The Impact Of ESG Ratings Of Listed Companies On Stock Price Volatility

With the development of society and the popularity of green finance,people are increasingly aware of the importance of corporate ESG performance,and investors and companies are beginning to realize the role that ESG plays in investment decisions.Especially in the post-epidemic era,there is a deeper understanding of the importance of protecting the ecological environment and achieving a balance between the economy and the ecology.In the context of green recovery plan and "dual carbon" target,the market’s requirements for companies are no longer limited to business performance,and investors are no longer limited to the traditional investment philosophy,but the non-financial performance of companies,such as ESG performance,has become particularly important.The ESG concept is an important driving force for green transformation.Integrating the ESG development concept into corporate planning is a prerequisite for high-quality corporate development.ESG performance of enterprises can reduce the information asymmetry between enterprises and investors,influence the choice of investors and the market,and also force enterprises to improve their environmental performance,social responsibility and internal governance,allowing them to develop with higher quality and play a role in curbing abnormal fluctuations in their share prices and maintaining the stable development of the capital market.In contrast,there is little literature on the relationship between ESG ratings and share price volatility of listed companies.Therefore,it is necessary to explore the relationship between ESG ratings of listed companies and share price volatility,as well as theoretical additions to the influencing factors of share price volatility.Based on theories such as efficient market theory,information asymmetry theory,and sustainability theory,this thesis provides an in-depth analysis of the mechanism of ESG ratings on stock price volatility and establishes a regression model for empirical analysis.On this basis,the impact of ESG rating differences on stock price volatility and whether the impact of ESG rating on stock price volatility varies depending on whether a company belongs to an industrial sector or a non-industrial sector are further analyzed.Due to the fledging period of domestic ESG ratings and the deficiency of statistics,this thesis selects the corporate ESG ratings of the comparatively large amount of data from the three-tier rating agencies—Sino-Securities,Syn Tao Green Finance and CASVI,after which it further sets the research interval as 2016—2020 based on the availability of rating data,and chooses A-share listed enterprises with ESG ratings from all three institutions as the research sample,with a total of 585 sets of observations in the end.After empirical analysis,the following research conclusions were drawn:（1）There is a significant negative relationship between ESG ratings and share price volatility,i.e.,the higher the ESG rating,the less volatile the company’s share price.（2）ESG rating differences positively affect stock price volatility,i.e.,the smaller the ESG rating differences,the less volatile the firm’s stock price.（3）The effect of ESG rating on stock price volatility varies depending on whether the firm belongs to an industrial sector or not.The above findings all pass the robustness test and confirm that ESG rating can suppress the share price volatility of companies and stabilize the capital market.