Does ESG Rating Affect Corporate Innovation?

Abstract

Promoting the development of innovation is the core requirement for achieving economic growth in the new era. The performance of Environmental, Social responsibility and Governance (ESG) is an important indicator to measure the sustainable development ability of enterprises. How the ESG rating affects the corporate innovation is still a hot issue that needs to be answered urgently. Based on the quasi-natural experiment of SynTao Green Finance's announcement of ESG rating in 2015, we use Chinese listed companies in Shanghai and Shenzhen from 2011 to 2019 as samples to test the impact of ESG rating on corporate innovation and its transmission mechanism. The research results show that there is a significant positive relationship between ESG rating and corporate innovation, and ESG rating mainly promotes corporate innovation by reducing agency costs and easing financing constraints. This research helps to clarify the relationship between ESG rating and corporate innovation, and can provide an important reference for the Chinese government to formulate relevant policies to improve the ESG rating system, promote corporate innovation and sustainable economic development.