Does It Pay to Be Responsible? The Performance of ESG Investing in China

Xiaoke Zhang, Xuankai Zhao and Yu He

Emerging Markets Finance and Trade, 2022, vol. 58, issue 11, 3048-3075

Abstract: The capital market in China has progressed rapidly within the realm of ESG and sustainability. This study investigates whether and how ESG investing works in China. The portfolio-level analysis shows that both high- and low-level ESG portfolios can earn higher abnormal returns, which implies a non-linear relationship between ESG and portfolio excess returns. In stock-level analysis, the effect of ESG on future stock returns varies by pillar and sector. Governance and social pillars work in opposite directions to predict returns. In the secondary (tertiary) sector, higher ESG scores predict lower (higher) returns. Furthermore, we find that higher ESG performance is associated with worse future profitability, which impairs firm value, and lower cost of equity capital, which increases firm value.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2022.2026768 (text/html)
Access to full text is restricted to subscribers.

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:mes:emfitr:v:58:y:2022:i:11:p:3048-3075

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2022.2026768

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().