{"title":"Is ESG performance a protective umbrella for ESG violations?","authors":"Hongrui Chai , Zhenhao Cheng , Weixing Wu","doi":"10.1016/j.irfa.2024.103858","DOIUrl":null,"url":null,"abstract":"<div><div>We investigate whether environmental, social, and governance (ESG) performance acts as an umbrella protecting stock prices from ESG violations. Using ESG violation events from 2009 to 2022 in China, we find that the listed companies with high ESG performance exhibit lower cumulative abnormal returns during the event window. Further, the negative relation between ESG performance and market reaction during ESG violations is moderated by the motivation of ESG practices and the risk of greenwashing. Specifically, compared with the firms that view ESG development as a long-term goal, the negative relationship between ESG performance and market reaction is stronger for firms treating ESG as a short-term profitability tool. Companies with high greenwashing risk demonstrate an intensified negative relationship between ESG performance and market reaction during violations.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"98 ","pages":"Article 103858"},"PeriodicalIF":7.5000,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Financial Analysis","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1057521924007907","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate whether environmental, social, and governance (ESG) performance acts as an umbrella protecting stock prices from ESG violations. Using ESG violation events from 2009 to 2022 in China, we find that the listed companies with high ESG performance exhibit lower cumulative abnormal returns during the event window. Further, the negative relation between ESG performance and market reaction during ESG violations is moderated by the motivation of ESG practices and the risk of greenwashing. Specifically, compared with the firms that view ESG development as a long-term goal, the negative relationship between ESG performance and market reaction is stronger for firms treating ESG as a short-term profitability tool. Companies with high greenwashing risk demonstrate an intensified negative relationship between ESG performance and market reaction during violations.
期刊介绍：
The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.
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