The impact of ESG ratings on firm risks in Taiwan's market

Shun Fen Chang; Bai Sian Chen; Hong Yi Chen; Hsiao Yin Chen

doi:10.1016/j.pacfin.2025.102819

The impact of ESG ratings on firm risks in Taiwan's market

Shun Fen Chang
, Bai Sian Chen^*
, Hong Yi Chen
, Hsiao Yin Chen

^*Corresponding author for this work

Department of Digital Financial Technology

Ltd.
National Chengchi University
Chung Yuan Christian University

Research output: Contribution to journal › Journal Article › peer-review

4 Scopus citations

Abstract

This study investigates the impact of a firm's ESG achievements on various dimensions of firm risk, including financial risks, stock price crash risks, and financial constraints. Empirical evidence reveals a negative association between ESG scores and financial risks, as well as financial constraints, indicating that higher ESG performance contributes to lower overall firm risk. The reduction in crash risks becomes particularly evident during the COVID-19 crisis, highlighting the protective role of ESG engagement in times of market stress. These findings suggest that strategic investment in ESG activities enhances a firm's resilience and stability during both normal and adverse conditions.

Original language	English
Article number	102819
Journal	Pacific Basin Finance Journal
Volume	92
DOIs	https://doi.org/10.1016/j.pacfin.2025.102819
State	Published - 09 2025

Bibliographical note

Publisher Copyright:
© 2025 Elsevier B.V.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 3 Good Health and Well-being

Keywords

Crash risk
ESG
Financial constraint
Financial risk

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10.1016/j.pacfin.2025.102819

Cite this

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title = "The impact of ESG ratings on firm risks in Taiwan's market",

abstract = "This study investigates the impact of a firm's ESG achievements on various dimensions of firm risk, including financial risks, stock price crash risks, and financial constraints. Empirical evidence reveals a negative association between ESG scores and financial risks, as well as financial constraints, indicating that higher ESG performance contributes to lower overall firm risk. The reduction in crash risks becomes particularly evident during the COVID-19 crisis, highlighting the protective role of ESG engagement in times of market stress. These findings suggest that strategic investment in ESG activities enhances a firm's resilience and stability during both normal and adverse conditions.",

keywords = "Crash risk, ESG, Financial constraint, Financial risk",

author = "Chang, \{Shun Fen\} and Chen, \{Bai Sian\} and Chen, \{Hong Yi\} and Chen, \{Hsiao Yin\}",

note = "Publisher Copyright: {\textcopyright} 2025 Elsevier B.V.",

year = "2025",

month = sep,

doi = "10.1016/j.pacfin.2025.102819",

language = "英语",

volume = "92",

journal = "Pacific Basin Finance Journal",

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T1 - The impact of ESG ratings on firm risks in Taiwan's market

AU - Chang, Shun Fen

AU - Chen, Bai Sian

AU - Chen, Hong Yi

AU - Chen, Hsiao Yin

PY - 2025/9

Y1 - 2025/9

N2 - This study investigates the impact of a firm's ESG achievements on various dimensions of firm risk, including financial risks, stock price crash risks, and financial constraints. Empirical evidence reveals a negative association between ESG scores and financial risks, as well as financial constraints, indicating that higher ESG performance contributes to lower overall firm risk. The reduction in crash risks becomes particularly evident during the COVID-19 crisis, highlighting the protective role of ESG engagement in times of market stress. These findings suggest that strategic investment in ESG activities enhances a firm's resilience and stability during both normal and adverse conditions.

AB - This study investigates the impact of a firm's ESG achievements on various dimensions of firm risk, including financial risks, stock price crash risks, and financial constraints. Empirical evidence reveals a negative association between ESG scores and financial risks, as well as financial constraints, indicating that higher ESG performance contributes to lower overall firm risk. The reduction in crash risks becomes particularly evident during the COVID-19 crisis, highlighting the protective role of ESG engagement in times of market stress. These findings suggest that strategic investment in ESG activities enhances a firm's resilience and stability during both normal and adverse conditions.

KW - Crash risk

KW - ESG

KW - Financial constraint

KW - Financial risk

UR - https://www.scopus.com/pages/publications/105006788610

U2 - 10.1016/j.pacfin.2025.102819

DO - 10.1016/j.pacfin.2025.102819

M3 - 文章

AN - SCOPUS:105006788610

SN - 0927-538X

VL - 92

JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

M1 - 102819

ER -

The impact of ESG ratings on firm risks in Taiwan's market

Abstract

Bibliographical note

UN SDGs

Keywords

Access to Document

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