ESG Performance and Systemic Risk: Evidence from Listed Commercial Banks
DOI:
https://doi.org/10.62051/gdnbqs36Keywords:
ESG Performance, Systemic Risk, Listed Commercial Banks.Abstract
Against the backdrop of the goals to achieve carbon peak by 2030 and carbon neutrality by 2060, the Environmental, Social, and Governance (ESG) concept aligns with the requirements of China‘s sustainable development. Favorable ESG performance by banks is of great significance for the advancement of green finance in China. Concurrently, risk prevention is a perpetual theme in China’s financial industry. Therefore, utilizing quarterly panel data of 36 listed banks in China from 2009 to 2023, this paper employs the DCC-GARCH model to calculate two metrics for systemic risk: CoVaR and MES. It empirically analyzes the impact of ESG ratings performance on the systemic risk of China’s listed banks. Furthermore, heterogeneity analysis is conducted based on three dimensions: ownership structure, asset size, and analyst coverage. The results of robustness tests support the main conclusions of this study. The findings reveal that favorable ESG ratings performance by banks significantly exacerbates their systemic risk. This exacerbating effect is more pronounced among non-state-owned banks, large-scale banks, and banks with high analyst coverage. In view of this, it is imperative to fully refine the ESG rating system and implement differentiated supervision based on the varying effects of ESG ratings across different types of banks, thereby enhancing the risk prevention and control capabilities of listed banks.
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