China stock market liberalization and company ESG performance: The mediating effect of investor attention

Abstract

As China has begun to promote a high level of opening up of its stock market, ESG indicators have gradually become one of the important decision-making tools for overseas investors to invest in China's stock market. Using the data of Chinese listed companies from 2011 to 2022, this paper examines the impact of stock market opening on the ESG of listed companies and the mediating role of investor attention in this process by using the Difference-in-Differences (DID) and mediating effect models. Research shows that the opening of the stock market improves the ESG performance of listed companies by attracting more investor attention. Investor focus, investor sentiment, and investor interaction all constitute the intermediary channels through which the stock market opening affects ESG. The above mediating effect is established in most industries and is stronger in state-owned enterprises. This mediating effect plays the largest role in improving corporate governance, followed by social and environmental responsibility. The opening of China's stock market provides a model for emerging market countries to improve their ESG performance. Based on the research conclusions, we propose suggestions for addressing the mediating effect of investor attention, expanding the opening of the stock market to provide sufficient channels for investors to fully participate in market transactions, and differentiated ESG information disclosure.