Does ESG rating policy reduce corporate risk-taking? Evidence from China

Shilei Wu, Fu-You Zhou, Deng-Kui Si and Jiawei Hao

Pacific-Basin Finance Journal, 2025, vol. 90, issue C

Abstract: This paper investigates the impact of environmental, social, and governance (ESG) ratings on corporate risk-taking using non-financial listed firms from 2010 to 2020 in China. We find a significantly negative correlation between ESG ratings and corporate risk-taking, indicating that higher ESG ratings are associated with reduced corporate risk-taking behavior. The result remains held to address endogeneity concerns and various robustness checks. We identify the channels of reducing information asymmetry, enhancing investment efficiency, and improving trade credit through which ESG rating inhibits corporate risk-taking. Further analysis shows that the negative impact of ESG ratings on corporate risk-taking is more pronounced for firms with lower audit quality, voluntary ESG disclosures, and lower institutional ownership. This paper provides a novel theoretical view of the relationship between ESG ratings and corporate risk-taking.

Keywords: ESG ratings; Corporate risk-taking; Information asymmetry; Investment efficiency; Trade credit (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X24004062
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:90:y:2025:i:c:s0927538x24004062

DOI: 10.1016/j.pacfin.2024.102654

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().