An Empirical Study on the Influence of ESG Ratings on Earnings Management among Listed Companies in China

Ampedu Raphael, Antwi Agyei Bright, Mang'ati Frank Peter, Boadi Joana Ankobea, Boakye Boateng Gifty, Nunoo Linda Ofeibea, Mensah Cornelius Nii Odoi and Mensah Richmond
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Ampedu Raphael: Zhongnan University of Economics and Law, China.
Antwi Agyei Bright: Zhongnan University of Economics and Law, China.
Mang'ati Frank Peter: Zhongnan University of Economics and Law, China.
Boadi Joana Ankobea: Zhongnan University of Economics and Law, China.
Boakye Boateng Gifty: Central University of Finance and Economics, China.
Nunoo Linda Ofeibea: Zhongnan University of Economics and Law, China.
Mensah Cornelius Nii Odoi: Zhongnan University of Economics and Law, China.
Mensah Richmond: University of Cape Coast, Ghana

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 8, 3678-3693

Abstract: This study examines the influence of ESG (Environmental, Social, and Governance) ratings on the financial performance of listed companies in China from 2011 to 2021. With a sample of 21,289 A-share listed companies, the study employs a fixed-effects panel analysis, focusing on Return on Assets (ROA) and Return on Equity (ROE) as key financial indicators. The research incorporates comprehensive ESG ratings from the China Securities Index Company and Wind database, alongside control variables like company size, age, and industry. The findings reveal that ESG ratings significantly and positively affect financial performance, with companies exhibiting higher ESG scores demonstrating better asset management and profitability. The robustness of these results is confirmed through various tests, including substituting dependent and explanatory variables, and addressing multicollinearity concerns. The study emphasizes the increasing significance of ESG factors in the financial well-being of businesses. It demonstrates the connectedness between social responsibility and economic success. This study supports the use of stakeholder theories in examining the influence of ESG ratings on earnings management among listed companies. However, its scope is limited to China, making the findings potentially unsuitable for other developing nations.

Date: 2024
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