The Causal Impact of ESG Ratings on Corporate Innovation: Evidence from Listed Companies

This study contributes to the growing literature on corporate innovation by examining the causal impact of ESG ratings on the innovation activities of listed companies. Specifically, we find that ESG ratings have a positive causal effect on corporate innovation, providing a research perspective on the role of corporate governance and social responsibility in fostering innovation, as explored in previous literature (O'Connor and Rafferty, 2012; Cook et al., 2019). Existing research on the impact of ESG ratings on innovation has focused on green innovation (Tan et al., 2022; Wang et al., 2023). Furthermore, our channel analysis indicates that ESG ratings reduce financing constraints, agency costs, CEO turnover likelihood, stock liquidity, and increase R&D investment and the number of R&D personnel, which promotes corporate innovation and provides more empirical evidence for related research (Hall, 2002; Hall and Lerner, 2009; Bereskin and Hsu, 2011; Bereskin and Hsu, 2014; Fang et al., 2014; Haoer, 2016; Yuan et al., 2023).