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

This paper contributes to the growing literature on corporate innovation by examining the causal effect of ESG ratings on the innovation activities of listed companies. Specifically, we find that ESG ratings have a positive causal impact on corporate innovation, providing a research perspective on the role of corporate governance and social responsibility in corporate innovation for the increasing literature (O'connor and Rafferty, 2012; Cook et al., 2019). Existing studies on the impact of ESG ratings on innovation focus on green innovation (Tan and Zhu, 2022; Wang et al., 2023). Finally, our channel analysis shows that ESG ratings reduce the financing constraints, agency costs, CEO turnover likelihood, stock liquidity, and increase the proportion of R&D expenditure and the number of R&D personnel, promoting corporate innovation, which is supported by previous research (Hall, 2002; Hall and Lerner, 2009; Bereskin and Hsu, 2011; Bereskin and Hsu, 2014; Fang et al., 2014; Haugh, 2016; Yuan et al., 2023), providing more empirical evidence.