Literature Review of the Impact of Chinese Corporate ESG Ratings on Stock Market Performance

ESG ratings play a pivotal role in assessing the success of businesses within their surroundings, societal context, and management. These ratings are indicative of not just their performance in the financial sphere, but also significantly impact their standing in the financial market. This document investigates the interplay between these ESG ratings of Chinese firms and their performance in the stock market. Three theoretical frameworks have been chosen, namely information asymmetry, stakeholder, and corporate reputation theories. It also collates existing studies. A theoretical model is developed to investigate how Chinese corporate ESG ratings affect stock market performance. The study delves into how ESG ratings from Chinese companies affect stock market performance in four key areas: the relationship between ESG ratings and corporate financial outcomes, the effect of these ratings on stock market value, their effect on investor actions, and how these ratings shape the comprehensive performance of the stock market. The study in this paper makes a marginal contribution to the ESG rating of Chinese enterprises.