Shaping Liquidity: On the Causal Effects of ESG Disclosure

Abstract

As a core element of the capital market, stock liquidity has always been valued by all stakeholders of enterprises. As the market mechanism becomes more complex and the degree of information asymmetry intensifies, information disclosure plays a vital role in various economic activities. From the perspective of investor confidence, this paper studies the internal mechanism and action paths of ESG information disclosure, investor confidence and stock liquidity. Through the sub-analysis of ESG rating scores, the impact of environment, social responsibility and corporate governance on corporate stock liquidity is studied. The results show that :(1) ESG information disclosure has a positive driving effect on corporate liquidity, and investor confidence partially mediates the relationship between ESG information disclosure and liquidity. (2) Through the sub-research of ESG information disclosure, it is found that the rating scores of environment (E) and social responsibility (S) have a significant impact on stock liquidity, while the information disclosure at the level of corporate governance (G) has no significant impact on liquidity. (3) Heterogeneity analysis shows that ESG disclosure has a more significant impact on stock liquidity for companies whose auditors are not from the Big Four accounting firms than for companies whose auditors are from the Big Four accounting firms.