The impact of ESG ratings on firm risks in Taiwan's market

Shun-Fen Chang, Bai-Sian Chen, Hong-Yi Chen and Hsiao-Yin Chen

Pacific-Basin Finance Journal, 2025, vol. 92, issue C

Abstract: This study investigates the impact of a firm's ESG achievements on various dimensions of firm risk, including financial risks, stock price crash risks, and financial constraints. Empirical evidence reveals a negative association between ESG scores and financial risks, as well as financial constraints, indicating that higher ESG performance contributes to lower overall firm risk. The reduction in crash risks becomes particularly evident during the COVID-19 crisis, highlighting the protective role of ESG engagement in times of market stress. These findings suggest that strategic investment in ESG activities enhances a firm's resilience and stability during both normal and adverse conditions.

Keywords: Crash risk; ESG; Financial constraint; Financial risk (search for similar items in EconPapers)
JEL-codes: G14 G30 G32 M14 M40 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001568

DOI: 10.1016/j.pacfin.2025.102819

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