Corporate ESG Performance and Stock Liquidity in China: Evidence of a Positive Relationship

This study examines the relationship between corporate environmental, social, and governance (ESG) performance and stock liquidity in China. The researchers find robust evidence that ESG performance positively and significantly affects firm's stock liquidity. They attribute this positive effect to ESG performance reducing corporate risk and gaining stakeholder support. The study also highlights that the positive effect of ESG performance is driven by all three ESG dimensions: environmental, social, and governance.

The study emphasizes the importance of corporate ESG performance and its economic consequences. It suggests that firms with higher ESG scores tend to have greater stock liquidity. The results are robust even after considering alternative ESG measures and different model specifications.

The study contributes to the existing literature by:

• Exploring the channels between ESG performance and stock liquidity: The study reveals that ESG performance improves stock liquidity by reducing corporate risk and gaining stakeholder support, which aligns with stakeholder theory.* Focusing on corporate behavior: The study investigates the determinants of stock liquidity from the perspective of corporate behavior, specifically, the positive role of corporate ESG performance in stock liquidity.* Providing empirical evidence in the Chinese context: The research specifically focuses on the Chinese market, providing insights into the impact of ESG on stock liquidity within a policy-oriented and institutional context.

The study concludes that ESG plays a significant role in capital markets and that its implementation can improve the economic consequences of firms. It contributes to a better understanding of the positive role of ESG in the Chinese capital market context.