Corporate ESG Performance And Stock Price Crash Risk

Since 1990 s,China’s stock market has experienced several ups and downs,and the phenomenon of stock price crash is also very common.For the sustained and healthy development of China’s capital market,how to prevent the risk of stock price crash has become an urgent problem for us to consider.On the other hand,as human beings have a deeper understanding of the importance of protecting the ecological environment and realizing the balance between economy and ecology.Under the background of green recovery plan and "double-carbon" goal,the market’s requirements for enterprises are no longer limited to business performance.At the same time,the domestic research on traditional financial indicators and traditional information disclosure has become saturated,and investors are no longer limited to traditional investment ideas.The non-financial performance of enterprises has gradually attracted more investors’ attention.For example,the non-financial information mainly based on ESG performance is playing an important role in the securities market.On June 15 th,2018,China Securities Regulatory Commission revised the《Corporate Governance Guidelines for Listed Companies 》,which established a preliminary framework for ESG information disclosure.ESG is the abbreviation of Environment,Social Responsibility and Governance.With the development of society and the popularization of green finance,people are more and more aware of the importance of ESG performance,and investors and enterprises are beginning to realize the role ESG plays in investment decision-making.On the one hand,ESG evaluation system can effectively supervise and restrain the behavior of management,make enterprises develop with higher quality,reduce the probability of crisis events,and integrate ESG development concept into enterprise planning,which is the premise of high-quality development of enterprises.On the other hand,ESG concept is in line with the current national development policy,and it is also an important driving force for enterprises’ green transformation.At present,the academic research on the stock price crash in China mainly focuses on financial indicators or behavioral finance,while this thesis takes a new approach to explore how to reduce the risk of stock price crash of listed companies from the comprehensive performance of ESG.At present,ESG performance of listed companies has become a very mainstream non-financial index evaluation concept in the world.It is an index obtained by comprehensively considering three factors: enterprise environment,society and governance level.A good performance of ESG will produce certain information effect and reputation insurance effect,which will not only help to reduce the information asymmetry between enterprises and investors,but also make enterprises have a higher reputation.These will affect the choice of investors and markets,and will also force enterprises to improve their environmental performance,social responsibility and internal governance,so that enterprises can develop with higher quality,and play a role in restraining the abnormal fluctuation of stock prices and maintaining the stable development of capital markets.With the transformation and upgrading of China’s current economic structure,the external influence of listed companies has been paid more and more attention,and the ESG performance of listed companies has been paid more and more attention by investors.Based on the sustainable development theory,information asymmetry theory,stakeholder theory and reputation theory,this thesis tests the hypothesis by constructing OLS model regression,and makes theoretical and empirical analysis on the relationship between ESG performance and stock price crash risk.This thesis uses the research data of China’s A-share listed companies from 2010 to 2020,and the explanatory variable is the stock price crash risk explanatory variable.The ESG performance of listed companies selects the ESG rating disclosed by Huazheng Company.The main findings of this thesis are as follows: First,The results of benchmark regression show that there is a significant negative correlation between ESG performance and the risk of stock price crash,that is,good ESG performance helps to reduce the risk of stock price crash.Second,In the mechanism test,this thesis examines the inhibitory effect of good ESG performance on the risk of stock price collapse,starting with two mechanisms: the information effect and reputation insurance effect generated by ESG performance.Empirical findings show that,on the one hand,the better the ESG performance of a company,the lower the degree of internal and external information asymmetry,and the higher the internal information transparency of the company,which is conducive to reducing the risk of stock price collapse events.On the other hand,the better an enterprise’s ESG performance,the better its reputation will be,and the less negative news will affect investors’ mood,thus alleviating the impact of negative events on the enterprise.Therefore,reputation insurance effect is also one of the mechanisms through which ESG performance acts on the risk of stock price crash.Third,the impact of ESG performance on the risk of stock price collapse is heterogeneous,that is,it also presents varying degrees of effect in different enterprise environments.For example,research has found that in enterprises with low internal governance level and external audit quality level,good ESG performance has a more significant effect on stabilizing stock prices,and can more effectively reduce the risk of stock price collapse.This may be because companies with high internal control quality and high external audit quality will face less risk of stock price crash.this thesis also conducted a series of robustness tests,using replacement variables,Heckman two-stage,instrumental variable method and entropy balance method to repeatedly test the robustness of the research conclusions of this thesis.This study not only helps to broaden the research on the economic consequences of ESG performance of listed companies,but also has important practical significance for promoting the institutional construction of the ESG comprehensive evaluation system in China.It also provides a new analytical approach to the formation of the risk of stock price collapse for enterprises,and provides a reference basis for enterprises to prevent and reduce the risk of stock price collapse.