Research on the relationship between ESG disclosure quality and stock liquidity of Chinese listed companies

Xinda Cao; Tianshen Mei; Shenglan Li; Xinda Cao; Tianshen Mei; Shenglan Li

doi:10.3934/GF.2024002

Green Finance

2024, Volume 6, Issue 1: 24-51. doi: 10.3934/GF.2024002

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Research on the relationship between ESG disclosure quality and stock liquidity of Chinese listed companies

1.
Lingnan College Sun Yat-sen University, Guangdong, China
2.
Guangzhou Foreign Language School International Department, Guangdong, China

Received: 24 October 2023 Revised: 15 January 2024 Accepted: 22 January 2024 Published: 29 January 2024
JEL Codes: G38

In this article, we aim to verify the relationship between ESG disclosure quality and stock liquidity of listed companies and to provide a detailed analysis of its mechanisms. Based on the theories of information asymmetry, signal transmission, reputation, and stakeholder, we summarize and analyze the theoretical and logical framework of how ESG information disclosure can impact stock liquidity. Following the fixed effect (considering individual, year, and industry), panel model was applied to empirically test the relationship between ESG disclosure score and stock liquidity with data ranging from 2012 to 2021. The research findings indicate that improving the quality of ESG disclosure by companies can significantly enhance the level of stock liquidity. Furthermore, we analyze and verify through mechanism tests that ESG disclosure can influence stock liquidity by increasing analyst attention and media coverage (information effect) and enhancing reputation (reputation effect). From a theoretical perspective, the paper enriches the research related to the economic impact of ESG information disclosure and factors affecting stock liquidity. Also, we validate theories connected to information and reputation. From a practical perspective, the research has specific reference value for policymakers, enterprise managers, and investors.
- ESG disclosure,
- stock liquidity,
- listed companies,
- information effect,
- reputation effect
Citation: Xinda Cao, Tianshen Mei, Shenglan Li. Research on the relationship between ESG disclosure quality and stock liquidity of Chinese listed companies[J]. Green Finance, 2024, 6(1): 24-51. doi: 10.3934/GF.2024002

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Abstract

In this article, we aim to verify the relationship between ESG disclosure quality and stock liquidity of listed companies and to provide a detailed analysis of its mechanisms. Based on the theories of information asymmetry, signal transmission, reputation, and stakeholder, we summarize and analyze the theoretical and logical framework of how ESG information disclosure can impact stock liquidity. Following the fixed effect (considering individual, year, and industry), panel model was applied to empirically test the relationship between ESG disclosure score and stock liquidity with data ranging from 2012 to 2021. The research findings indicate that improving the quality of ESG disclosure by companies can significantly enhance the level of stock liquidity. Furthermore, we analyze and verify through mechanism tests that ESG disclosure can influence stock liquidity by increasing analyst attention and media coverage (information effect) and enhancing reputation (reputation effect). From a theoretical perspective, the paper enriches the research related to the economic impact of ESG information disclosure and factors affecting stock liquidity. Also, we validate theories connected to information and reputation. From a practical perspective, the research has specific reference value for policymakers, enterprise managers, and investors.

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