Research on the Impact of Green Finance Reform Policy on ESG Premia——Empirical Evidence from China's A-share Market

This article employs China's green finance reform policy pilot as an exogenous shock for constructing a theoretical model of multi-factor risk asset portfolios that incorporate ESG factors. The empirical investigation utilizes a multi-period DID model to examine the impact of green finance reform policies on the ESG risk premium of listed companies in pilot cities. The findings indicate that firms which disclose ESG information and exhibit high ESG performance tend to generate higher additional capital returns within green finance pilot cities. Notably, these outcomes remain robust even after subjecting the results to a series of rigorous tests for validity. The results of the heterogeneity test show that with the continuity of the green financial reform pilot policy, policy guidance will become more significant as the number of pilot cities increases, resulting in a more significant risk premium for high ESG performance companies in the short term, and an increase in the market's response speed to ESG risk premiums in the long term. The cross-effect results show that there is an indirect negative cross-effect of guidance from various green policies, and the market shows greater distrust of high ESG performance information caused by more regulations. Overall, this study offers a foundational theoretical framework for China to leverage green finance reform as a mechanism for guiding listed companies towards enhancing green value returns and fostering the development of a green economy.