ESG and Stock Price Crash Risk: Role of Financial Constraints. (27th September 2021)

• Record Type: Journal Article
• Authors: Bae, JinCheol; Yang, Xiaotong; Kim, Myung‐In
• Is Part Of: Asia-Pacific journal of financial studies. Volume 50:Number 5(2021)
• Page Start: 556
• Page End: 581
• Publication Date: 2021-09-27
• Subjects: Corporate social responsibility -- ESG -- Financial constraints -- Stock price crash risk; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12351
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: This paper investigates whether corporate performance measured from three aspects—environmental, social responsibility and governance ("ESG")—are associated with stock price crash risk, and also examines how the relation between ESG ratings and stock price crash risk is affected by the degree of financial constraint. Our empirical results show that ESG ratings reduce the stock price crash risk, and this relation is significantly alleviated for financially constrained firms. The results imply that greater financial constraint suppresses the positive role of corporate social responsibility in mitigating the risk of a stock price crash.