Concealment and leakage of bad news: ESG rating divergence and stock price crash risk

Using a sample of Chinese A-share listed firms from 2009 to 2021, we examine the impact of ESG rating divergence on stock price crash risk. We find that ESG rating divergence signals potential bad news leakage, reflecting negative ESG evaluations and heightened information asymmetry, which increases crash risk—particularly among firms with low baseline risk. Major shareholder and management ownership mitigate this effect through monitoring and incentives, while institutional herding aggravates it. Investor sentiment negatively moderates the relationship. Heterogeneity analysis reveals that the positive effect is pronounced in local firms and those heavily covered by analysts. Our findings deepen the understanding of ESG rating divergence, enabling investors to better assess corporate ESG profiles and helping stabilize capital markets.

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Publication Details

Journal
China Journal of Accounting Studies
Published
2026-07-17
DOI
https://doi.org/10.1080/21697213.2026.2704337
Primary Topic
Corporate Social Responsibility Reporting
Type
article
Field-Weighted Citation Impact
0.00

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article

Concealment and leakage of bad news: ESG rating divergence and stock price crash risk

Yuting Feng, Albert Tsang, Xuemeng Guo
China Journal of Accounting Studies
Corporate Social Responsibility Reporting
article

Concealment and leakage of bad news: ESG rating divergence and stock price crash risk

Yuting Feng, Albert Tsang, Xuemeng Guo
article en

Abstract

Using a sample of Chinese A-share listed firms from 2009 to 2021, we examine the impact of ESG rating divergence on stock price crash risk. We find that ESG rating divergence signals potential bad news leakage, reflecting negative ESG evaluations and heightened information asymmetry, which increases crash risk—particularly among firms with low baseline risk. Major shareholder and management ownership mitigate this effect through monitoring and incentives, while institutional herding aggravates it. Investor sentiment negatively moderates the relationship. Heterogeneity analysis reveals that the positive effect is pronounced in local firms and those heavily covered by analysts. Our findings deepen the understanding of ESG rating divergence, enabling investors to better assess corporate ESG profiles and helping stabilize capital markets.

China Journal of Accounting Studies
Beijing Jiaotong University (CN), National Institute of Clean and Low-Carbon Energy (CN), Zhejiang University (CN)
National Natural Science Foundation of China
Openalex Percentile: Top 6%
Corporate Social Responsibility Reporting
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Concealment and leakage of bad news: ESG rating divergence and stock price crash risk — Yuting Feng, Albert Tsang, et al. · China Journal of Accounting Studies (2026) | TGRS Research Map | TGRS