The relationship between ESG rating adjustments and corporate financial performance

Li-Chuan Chou, (Anderson) Yan, Yun-Chia and Chung-Kai Huang

Finance Research Letters, 2025, vol. 82, issue C

Abstract: Shanaev and Ghimire (2022) point out that the existing ESG literature mainly focuses on the ESG rating level of each company, while ignoring the effect of company ESG rating adjustments. To fill this gap in the literature, this study examines the impact of ESG rating adjustments (upgrades or downgrades) on a company’s financial performance using a sample of Taiwanese-listed and OTC firms from 2015 to 2021. The results from our quantile regression models show that an upward improvement in the ESG rating level has an adverse impact on firms’ current profitability, especially for firms with poor financial performance.

Keywords: ESG rating adjustment; Listed companies; OTC companies; Financial performance; Quantile regression (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008438

DOI: 10.1016/j.frl.2025.107584

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