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.
Authors
- Yuting Feng (ORCID: https://orcid.org/0000-0002-6886-6981)
- Albert Tsang
- Xuemeng Guo
Institutions
- Beijing Jiaotong University (CN)
- National Institute of Clean and Low-Carbon Energy (CN)
- Zhejiang University (CN)
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
Funders
- National Natural Science Foundation of China