Does ESG Disclosure Matter in China Stock Market?

Absztrakt (kivonat)

Environmental, Social, and Governance (ESG) is a popular investing strategy that has emerged in recent years in the financial market, as well as becoming an investment guide for institutional investors. It is also a physical manifestation of the notion of sustainable growth in the financial market and small businesses. With steady progress on the "carbon neutrality" goal, China's economy entered a new stage of high-quality growth, and domestic ESG investment fever is heating up. Actively adopting ESG would not only strengthen the governance of publicly traded firms but would also effectively contribute to the country's green and low-carbon economic transformation. However, China's ESG practice is still in its infancy, with several obstacles and challenges. Therefore, this paper aims to examine the popularity of ESG in China, the benefits of ESG reporting to stakeholders, and explore why ESG reporting is of great concern to investors. Furthermore, through event study methodology in a sample of 1,000 Chinese listed A-Share companies, the finding of accumulated average abnormal return confirms that ESG disclosure has a significantly positive impact on stock market performance, and in the performance of average abnormal return, share price overreacted after ESG disclosure. Thus, improving the transparency of nonfinancial information will provide investors and other stakeholders with more reliable information to link ESG performance and firm value.