Early Warning Effect Of ESG Ratings On The Risk Of Stock Price Crash Of Listed Companies

The collapse of share prices can have a serious negative impact on investors,listed companies and the capital market as a whole and is an issue of widespread concern.In recent years,ESG ratings have received increasing attention with the guidance of national policies and international popularity.This paper explores the early warning effect of the ESG composite score and sub-indicator scores on the risk of stock price collapse under the China Securities ESG Rating System,using the 2011-2021 A-share listed companies in Shanghai or Shenzhen as a sample,and also delves into the possible moderating effect,the early warning effect of the ESG ratings on the risk of stock price collapse for different types of companies,and performance of the relationship between ESG ratings and share price collapse risk during the "COVID-19 " outbreak.Based on the empirical findings,the following conclusions can be sorted out:(1)The overall ESG scores of enterprises are significantly and negatively related to the risk of stock price crash,i.e.enterprises with high ESG ratings have a lower risk of share price collapse,and the ESG composite rating has an early warning effect on the risk of share price collapse.(2)The three ESG indicators of environmental,social and corporate governance scores are significantly and negatively correlated with the risk of stock price collapse,i.e.companies with good environmental management,higher social responsibility and stronger corporate governance take a lower risk of share price collapse.ESG sub-index ratings have early warning effects on the risk of share price collapse,and the corporate governance capacity indicator has the most obvious early warning effect.(3)There is a negative effect of firm growth on the correlation between ESG ratings and the potential risk of share price collapse,i.e.the worse the growth of the firm,the more pronounced the early warning effect of ESG ratings on share price crash risk.(4)The warning effect of ESG ratings on the risk of share price collapse is more pronounced for small-scale firms compared to large-scale firms.(5)The warning effect of ESG ratings on the risk of share price collapse is more pronounced for companies in the central and western regions compared to those in the eastern regions.(6)During the "new crown" epidemic,companies with high ESG ratings were more resistant to the risk of share price collapse.Based on the above findings,the recommendations of this paper are:(1)For investors,they can avoid risks by paying attention to the ESG scores of companies,especially those indicators that rank high in importance,so that they can invest carefully.(2)For listed companies,they can measure the importance of indicators according to their own situation and develop effective sustainable business strategies,while small and midwestern companies should pay more attention to ESG-related performance.(3)For ESG rating agencies,China’s rating agencies should continue to enrich their analytical frameworks,improve their model settings,and strengthen their review of public information.(4)For the relevant government departments,they should draw on the advanced experience of foreign countries to expedite the formulation of relevant regulations and promote the establishment of a sound ESG disclosure and assessment system by industry management institutions and market regulators;at the same time,they should further promote the sustainable development of enterprises through a combination of rewards and punishments.