Capital market internationalization and firms' ESG performance: Evidence from the inclusion of China A-shares in the MSCI Emerging Market Index

Panting Zhao, Xin Yao and Rui Shen

Energy Economics, 2024, vol. 133, issue C

Abstract: This paper explores the impact of capital market internationalization on firms' ESG performance, utilizing the event that China A-shares were officially included in the MSCI Emerging Market Index. Using a sample of A-share non-financial listed companies, we find strong evidence that the ESG performance of companies included in the MSCI Emerging Market Index has been significantly improved. This finding remains robust after several robustness checks and the adoption of instrumental variables to circumvent endogeneity issues. Heterogeneity analysis shows that this effect is only significant for non-state-owned firms, firms located in provinces with higher levels of marketization, and firms in eastern cities. Further analysis verifies that the inclusion of China A-shares in the MSCI Emerging Market Index promotes firms' ESG performance by promoting institutional holdings and enhancing external supervision. Our findings shed light on the possible impact of capital market internationalization on corporate behavior in emerging markets.

Keywords: Capital market internationalization; Morgan Stanley Capital International Emerging Market Index; ESG; Emerging markets (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:133:y:2024:i:c:s0140988324001233

DOI: 10.1016/j.eneco.2024.107415

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