Social responsibility, Financial constraint, and Stock price crash risk: evidence from Korea

초록

This paper investigates the impact of environmental, social and governance (ESG) performance on stock price crash risk based on a sample of KSE-listed (Korea Stock Exchange) firms during 2012?2018. After empirical analysis, we find that the ESG scores is significantly negatively correlated with the risk of stock price crash. More specially, the individual ENV (environment), SOR (social responsibility) and GOV (governance) scores of ESG also have a significant and negative effect on the stock price crash risk. I also find that the negative relation between ESG and stock price crash is less pronounced for financial constraint firms, which suggesting that the impact of ESG on stock price crash risk will be alleviated in financial constraint firms. In other words, greater financial constraint leads to a reduction in the role of social and responsible activities in reducing stock price crashes. My findings provide validated information to the investors whether it is worth taking in consideration the ESG performance during investment decision making process, particularly for the stock market.