Research on the Role of ESG Performance in Capital Market Pricing Efficiency: An Analysis Based on Stock Price Synchronicity

Yuming Yin; Zilong Li; Kai Li; Tao Wang; Shunwei Cui

doi:10.31181/ijes1512026218

Authors

Yuming Yin International Business School, Tianjin Foreign Studies University, Tianjin, China Author https://orcid.org/0009-0007-9795-9021
Zilong Li International Business School, Tianjin Foreign Studies University, Tianjin, China Author https://orcid.org/0009-0008-2137-733X
Kai Li International Business School, Tianjin Foreign Studies University, Tianjin, China Author https://orcid.org/0009-0007-7459-3936
Tao Wang International Business School, Tianjin Foreign Studies University, Tianjin, China Author https://orcid.org/0009-0008-0320-2536
Shunwei Cui International Business School, Tianjin Foreign Studies University, Tianjin, China Author https://orcid.org/0009-0000-4359-9082

DOI:

https://doi.org/10.31181/ijes1512026218

Keywords:

ESG, Stock Price Synchronicity, Mediating Effect, Information Efficiency Theory, Noise Theory

Abstract

Firms’ active practice of Environmental, Social, and Governance (ESG) development principles holds significant value for enhancing capital market pricing efficiency. Using panel data from Chinese A-share listed firms from 2009 to 2023 and relying on the Hua Zheng ESG rating system, we constructed corresponding indicators to investigate the impact of ESG performance on stock price synchronicity. We find that firms’ ESG performance contributes to increased stock price synchronicity. This positive effect of ESG is more pronounced in samples of state-owned firms, large firms, and firms with higher bankruptcy risk. We further reveal the mechanism through which ESG promotes stock price synchronicity, identifying information disclosure quality and analyst attention as two key mediating variables, while information asymmetry exhibits a masking effect. We integrate information efficiency theory and noise theory within a unified analytical framework, advancing the development of relevant theories in emerging markets. The findings offer important insights into optimizing the role of ESG in enhancing capital market pricing efficiency.

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