Article2024

Does ESG performance affect the systemic risk sensitivity? Empirical evidence from Chinese listed companies

Fateh Saci N.A. · Sajjad M. Jasimuddin · Zuopeng Zhang

22 citations0/0 files storedManagement of Environmental Quality An International Journal

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Corporate Social Responsibility Reporting Financial Markets and Investment Strategies Sustainable Finance and Green Bonds

Abstract

Purpose This paper aims to examine the relationship between environmental, social and governance (ESG) performance and systemic risk sensitivity of Chinese listed companies. From the consumer loyalty and investor structure perspectives, the relationship between ESG performance and systemic risk sensitivity is analyzed. Design/methodology/approach Since Morgan Stanley Capital International (MSCI) ESG officially began to analyze and track China A-shares from 2018, 275 listed companies in the SynTao Green ESG testing list for 2015–2021 are selected as the initial model. To measure the systematic risk sensitivity, this study uses the beta coefficient, from capital asset pricing model (CPAM), employing statistics and data (STATA) software. Findings The study reveals that high ESG rating companies have high corresponding consumer loyalty and healthy trading structure of institutional investors, thereby the systemic risk sensitivity is lower. This paper reveals that companies with high ESG rating are significantly less sensitive to systemic risk than those with low ESG rating. At the same time, ESG has a weaker impact on the systemic risk of high-cap companies than low-cap companies. Practical implications The study helps the companies understand the influence of market value on the relationship between ESG performance and systemic risk sensitivity. Moreover, this paper explains explicitly why ESG performance insulates a firm’s stock from market downturns with the lens of consumer loyalty theory and investor structure theory. Originality/value The paper provides new insights on the company’s ESG performance that significantly affects the company’s systemic risk sensitivity.

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References

1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1952PORTFOLIO SELECTION*1965The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets 1976The arbitrage theory of capital asset pricing 2015ESG and financial performance: aggregated evidence from more than 2000 empirical studies 1966Equilibrium in a Capital Asset Market 2019Aggregate Confusion: The Divergence of ESG Ratings 2013Corporate social responsibility and access to finance

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