The Positive Impact of ESG Rating on Corporate Innovation: Evidence from SSCI Financial Papers

Theoretically, there are several reasons why ESG rating may have a positive impact on a company's innovation activities in SSCI financial papers. Firstly, a higher ESG rating indicates better corporate governance, which can promote a company's innovation activities (O'Connor and Rafferty, 2012). Secondly, a company's innovation activities may reduce short-term profits, and shareholders may not be able to timely understand the company's innovation performance, which may attribute poor performance to inadequate management efforts (Jiang & Yuan, 2018), and may force managers to resign. Conducting ESG rating in the formation process can help shareholders fully understand the company's performance in sustainable development, enhance the trust of shareholders in managers' innovation decisions, reduce the possibility of forced resignation of managers, and indirectly motivate managers to carry out innovation activities (Bereskin and Hsu, 2011; Bereskin and Hsu, 2014; Yuan et al., 2023). Finally, good ESG performance can reduce the financing constraints of listed companies (Bai et al., 2022), and the reduction of financing constraints can promote a company's innovation activities (Hall, 2002; Hall and Lerner, 2009; Howell, 2016).