Insight into the risk-resistant function of ESG performance: An organizational management perspective
Abstract
Purpose
This study aims to examine the risk-resistant role of environmental, social and governance (ESG) performance in the capital market, focusing on an organizational standpoint. Furthermore, it aims to offer management decision advice to companies seeking protection against stock market risks. Conclusions obtained through this research have the potential to enrich the economic consequences of ESG performance, provide practical implications for enhancing corporate ESG performance, improving corporate information quality and stabilizing capital market development.
Design/methodology/approach
Based on the data of Chinese A-share listed companies from 2009 to 2020, this study examines the risk-resistant function of ESG performance in the capital market. The impact of ESG performance on management behavior is analyzed from the perspective of organizational management and the three mechanisms of pre-event, during the event and post-event.
Findings
This paper demonstrates that companies that effectively implement ESG practices are capable of effectively mitigating risks associated with stock price crashes. Heterogeneity analysis reveals that the inhibitory effect of ESG performance on stock price crash risk is more pronounced in nonstate-owned enterprises and enterprises with higher levels of marketization. After controlling for issues such as endogeneity, the conclusions of this paper are still valid. The mechanism analysis indicates that ESG performance reduces the risk of stock price crash through three paths of organizational management: pre-event, during the event and post-event. That is, ESG performance plays the role of restraining managers’ opportunistic behavior, reducing information asymmetry and boosting investor sentiment.
Originality/value
This paper provides new insights into the relationship between ESG performance and stock price crash risk from an organizational management perspective. This study establishes three impact mechanisms (governance effect, information effect and insurance effect), offering a theoretical basis for strategic corporate decisions of risk management. Additionally, it comprehensively examines the contextual differences in the role of ESG performance, shedding light on the specific domains where ESG practices are influential. These findings offer valuable insights for promoting stable development in the capital market and fostering the healthy growth of the real economy.
Keywords
Acknowledgements
The authors gratefully acknowledge the editor-in-chief, associate editor and the anonymous referees, whose valuable comments and suggestions could greatly improve this paper.
Funding: This research is supported by the National Social Science Foundation Key Projects of China (Grant No. 19AGL009); Jiangsu Province Postgraduate Scientific Research Innovation Project (KYCX23_0832; KYCX23_1523).
Data availability: The data sets generated and/or analyzed during the current study are not publicly available due to privacy or ethical restrictions but are available from the corresponding author on reasonable request.
Declarations: Ethics approval and consent to participate: Not applicable.
Consent for publication: Not applicable.
Competing interests: The authors declare no competing interests.
Citation
Zhang, Y., Zhang, C., Zhang, S., Yang, Y. and Lan, K. (2023), "Insight into the risk-resistant function of ESG performance: An organizational management perspective", Chinese Management Studies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CMS-02-2023-0085
Publisher
:Emerald Publishing Limited
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