ESG and Stock Price Volatility Risk: Evidence from Chinese A-share Market

Zhixiang Xu, Dehong Liu, Yushu Li and Fanyu Guo

The North American Journal of Economics and Finance, 2025, vol. 75, issue PA

Abstract: This study investigates whether Environmental, Social, and Governance (ESG) performance influences stock idiosyncratic and extreme risks. We find that listed companies’ ESG performance significantly reduces stock idiosyncratic and extreme risks. Furthermore, we find that this mitigating effect is shaped by the nature of enterprise ownership and the firm life cycle. Through an additional mechanistic analysis, we confirm that ESG performance affects the stock price volatility risk of listed companies by reducing the levels of corporate earnings management and bolstering corporate reputation, thereby alleviating both idiosyncratic and extreme risk in stock prices.

Keywords: Environmental; Social; and Governance (ESG); Stock price; Volatility risk (search for similar items in EconPapers)
JEL-codes: G14 M14 M41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:75:y:2025:i:pa:s106294082400202x

DOI: 10.1016/j.najef.2024.102277

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