The Impact of Stock Liquidity on Corporate ESG : Which Industry Benefits?

ABSTRACT Considering the role of capital market governance in guiding corporate green transformation under the goal of environmental protection, this paper aims to empirically study the impact of stock liquidity on corporate ESG based on the data of listed companies in China from 2009 to 2021. The empirical results indicate that stock liquidity exerts a positive impact on the overall corporate ESG and the three specific dimensions, such as environmental performance, social responsibility, and corporate governance. Furthermore, empirical evidence suggests that stock liquidity can positively affect the ESG performance by inducing green technology innovation and improving managerial shareholding. Finally, the results for heterogeneity indicate that stock liquidity's positive impact on corporate ESG varies among different firms, which is stronger in heavily polluting industries, competitive industries, and western regions. By alleviating the influence of stock liquidity on corporate ESG performance, this study provides certain policy implications for promoting green transformation.