An Empirical Investigation into the Association Between ESG Ratings and Stock Price Volatility of Listed Firms
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An Empirical Investigation into the Association Between ESG Ratings and Stock Price Volatility of Listed Firms

Yiyang Chen 1*
1 Xi'an Jiaotong University
*Corresponding author: 18011420218@stu.xjtu.edu.cn
Published on 28 October 2025
Journal Cover
AEMPS Vol.233
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-485-4
ISBN (Online): 978-1-80590-486-1
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Abstract

In the context of the dual-carbon policy and the rise of Environmental, Social, and Governance (ESG) investment, there is still a lack of research on the mechanism by which ESG ratings affect stock price fluctuations. This paper is based on 11,934 observations of A-share stocks from 2019 to 2023. It employs a panel fixed effects model, with the SynTao Green Finance ESG rating as the core explanatory variable and the adjusted stock price fluctuation (VARADJ) as the dependent variable. It controls for enterprise size, financial and governance variables, and conducts an empirical test to examine the relationship between the two. The research has found that ESG ratings are significantly negatively correlated with stock price volatility. In the Ordinary Least Squares (OLS) regression, the ESG coefficient was -0.134 (without control variables) and -0.051 (with control variables). In the two fixed effects model, it was -0.037 (with industry and year fixed) and -0.024 (with control variables added), all of which passed the significance test (at 1% to 10% levels), indicating that for every 1 unit increase in ESG rating, stock price volatility decreases by 2.4% to 13.4%. The conclusion confirms that ESG performance mitigates abnormal stock price fluctuations by alleviating information asymmetry and conveying signals of sustainable development. It is recommended that enterprises enhance environmental and governance information disclosure to reduce valuation discrepancies, and investors incorporate ESG into the risk assessment framework to optimize asset allocation.

Keywords:

ESG rating, stock price volatility, panel fixed effect, information asymmetry

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Chen,Y. (2025). An Empirical Investigation into the Association Between ESG Ratings and Stock Price Volatility of Listed Firms. Advances in Economics, Management and Political Sciences,233,51-58.

References

[1]. Cai, Y., & Pang, Y. (2023). Research on the relationship between ESG performance and stock price fluctuation of listed mining companies. Journal of Hunan University of Finance and Economics, 39(5).

[2]. Wang, J., Ma, S., & Tian, B. (2022). ESG performance and stock market crash risk: A moderated effect by investor sentiment and executive overconfidence. Financial Development Research, (10).

[3]. Zheng, J., & Li, Z. (2024). Research on the impact of ESG performance on the growth of enterprise value. Price Theory and Practice, (06).

[4]. Zhuang, L., & Li, H. (2025). Investor preferences, ESG performance and corporate green innovation. Ecological Economy, 41(3).

[5]. Feng, P., Pang, J., & Qin, X. (2024). Research on the impact of ESG performance on stock liquidity: From the perspective of investors' attention and emotions. Finance Theory and Practice, (01).

[6]. Li, R., Xu, J., & Xu, G. (2024). Research on the impact of ESG rating disagreements on investor sentiment. Finance Theory and Practice, (10).

[7]. Xu, Z., Liu, D., Li, Y., et al. (2025). ESG and stock price volatility risk: Evidence from Chinese A-share market. North American Journal of Economics and Finance, 75(PA), 102277.

[8]. Wind ESG Rating. (2021, June 28). Wind ESG rating. Retrieved July 24, 2025, from https: //esg.wind.com.cn/WindESGRating/index.html?lan=cn#/ESGSummary/home

[9]. CSMAR Data. (n.d.). CSMAR database. Retrieved July 24, 2025, from https: //data.csmar.com/

[10]. Bruno, G. (2018). ESG and socially responsible investment: A critical review. SSRN Electronic Journal. https: //www.ssrn.com/abstract=3309650

[11]. Meher, B. K., Hawaldar, I. T., Mohapatra, L., Spulbăr, C., & Birau, R. (2020). The effects of environment, society and governance scores on investment returns and stock market volatility. International Journal of Energy Economics and Policy, 10(4), 234–239.

References

[1]. Cai, Y., & Pang, Y. (2023). Research on the relationship between ESG performance and stock price fluctuation of listed mining companies. Journal of Hunan University of Finance and Economics, 39(5).

[2]. Wang, J., Ma, S., & Tian, B. (2022). ESG performance and stock market crash risk: A moderated effect by investor sentiment and executive overconfidence. Financial Development Research, (10).

[3]. Zheng, J., & Li, Z. (2024). Research on the impact of ESG performance on the growth of enterprise value. Price Theory and Practice, (06).

[4]. Zhuang, L., & Li, H. (2025). Investor preferences, ESG performance and corporate green innovation. Ecological Economy, 41(3).

[5]. Feng, P., Pang, J., & Qin, X. (2024). Research on the impact of ESG performance on stock liquidity: From the perspective of investors' attention and emotions. Finance Theory and Practice, (01).

[6]. Li, R., Xu, J., & Xu, G. (2024). Research on the impact of ESG rating disagreements on investor sentiment. Finance Theory and Practice, (10).

[7]. Xu, Z., Liu, D., Li, Y., et al. (2025). ESG and stock price volatility risk: Evidence from Chinese A-share market. North American Journal of Economics and Finance, 75(PA), 102277.

[8]. Wind ESG Rating. (2021, June 28). Wind ESG rating. Retrieved July 24, 2025, from https: //esg.wind.com.cn/WindESGRating/index.html?lan=cn#/ESGSummary/home

[9]. CSMAR Data. (n.d.). CSMAR database. Retrieved July 24, 2025, from https: //data.csmar.com/

[10]. Bruno, G. (2018). ESG and socially responsible investment: A critical review. SSRN Electronic Journal. https: //www.ssrn.com/abstract=3309650

[11]. Meher, B. K., Hawaldar, I. T., Mohapatra, L., Spulbăr, C., & Birau, R. (2020). The effects of environment, society and governance scores on investment returns and stock market volatility. International Journal of Energy Economics and Policy, 10(4), 234–239.

Cite this article

Chen,Y. (2025). An Empirical Investigation into the Association Between ESG Ratings and Stock Price Volatility of Listed Firms. Advances in Economics, Management and Political Sciences,233,51-58.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICFTBA 2025 Symposium: Data-Driven Decision Making in Business and Economics

ISBN: 978-1-80590-485-4(Print) / 978-1-80590-486-1(Online)
Editor: Lukášak Varti
Conference website: https://2025.icftba.org/Bratislava.html
Conference date: 12 December 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.233
ISSN: 2754-1169(Print) / 2754-1177(Online)

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