Research On The Impact Of ESG Risk On Corporate Stock Market Performance

As sustainable development gradually becomes a societal consensus,there is an increasing demand from the entire society for businesses to engage in social responsibility practices to help address social issues.However,in reality,there continues to be a plethora of instances where corporate social responsibility is lacking,resulting in significant losses for both companies and stakeholders.Research has shown that environmental,social,and corporate governance(ESG)issues can impact company value,attracting widespread attention from investors,managers,and researchers.However,little attention has been paid to how and why negative ESG events or ESG risks impact a company’s performance in the stock market.Existing research often applies stakeholder theory to explain how corporate social responsibility affects firm performance.However,most studies focus on a specific type of stakeholder or treat stakeholders as a homogeneous group,neglecting the stakeholder diversity.Based on stakeholder theory and legitimacy theory,this study combines monthly ESG risk index data collected by the China Corporate Social Responsibility Research Center at Southern Weekend from January 2021 to December 2021 for A-share listed companies in China,with monthly company stock market performance data and other financial data from the CSMAR and Wind databases.The study examines the relationship between ESG risk ratings and company stock market performance,further exploring the influence of different types of stakeholder concerns on this relationship.Specifically,this study considers the government,international society,institutional investors,and individual retail investors as stakeholders.The research findings indicate that ESG risks suppress company stock market performance,especially for companies with higher levels of government attention,international exposure,and institutional investor concern.However,the attention of individual retail investors does not moderate the relationship between ESG risks and company stock market performance.The study also highlights the role of sacrificing corporate legitimacy in the impact of ESG risks on company stock market performance,as well as the differential response of the stock market to ESG risks under different stakeholder concerns.This study contributes to the literature on how and why ESG risks have a negative impact on company performance.Additionally,it supplements the application of stakeholder diversity in the ESG domain by examining the relationship between stakeholder concerns,ESG risks,and company stock market performance.