A Study On The Impact Of Corporate ESG Ratings On Stock Returns Under Risk Events

As global ecological and environmental problems become more and more severe,various risk events occur frequently,and capital markets fluctuate dramatically,the concept of green finance and sustainable development is advocated by more and more domestic and foreign experts and scholars and investors,and ESG investment gradually enters the public’s view and becomes a hot spot for market participants and the focus of academic research.ESG,or environmental responsibility,social responsibility and corporate governance,is an investment concept and a comprehensive assessment guideline for corporate performance,and has become an important indicator for measuring the sustainability of enterprises.There is a wealth of research,both domestically and internationally,that confirms that ESG investments can lead to excess returns for companies and investors,and some scholars have argued that ESG ratings of companies are unrelated or negatively correlated with their stock returns,but these studies have mainly analysed the relationship between ESG ratings and corporate value or stock returns under normal business environment of companies,and very little literature has examined the relationship between the two under the impact of sudden risk events.There is little literature on the relationship between the two in the context of unexpected risk events,so this paper seeks to add to this area of research.The outbreak of the new crown epidemic as a sudden,exogenous risk event provides an opportunity for this paper to investigate.Using an event study approach and cross-sectional data for regression analysis,this paper examines the role of corporate ESG ratings and the three subdimensions of ratings on the cumulative abnormal returns of listed company stocks during the New Crown epidemic,and further compares the impact of ESG ratings on firms at the time of the New Crown epidemic outbreak with that in a normal market operating environment to verify the role of ESG ratings on firms during a crisis.The final regression results demonstrate that under the impact of a systemic and exogenous risk event such as the New Crown epidemic,ESG ratings of listed companies have a significant positive impact on cumulative abnormal stock returns during the event window,and this positive impact is more significant in a crisis than in a normal market operating environment,verifying that ESG ratings of companies have the ability to attenuate the risk of stock price declines and enhance stock returns under a crisis shock The effect of the ESG rating on the share price of a company in a crisis reduces the risk of share price decline and increases stock returns.Finally,from the perspective of the government,listed companies and investors,this paper makes suggestions on how to promote the development of China’s ESG system,improve the ESG system and help companies and investors to prevent and resolve risks.