Analyst Tracking and Enterprise ESG Performance: -- Empirical Evidence from China

Jingcheng Zang

doi:10.54691/bcpbm.v50i.5610

Authors

Jingcheng Zang

DOI:

https://doi.org/10.54691/bcpbm.v50i.5610

Keywords:

Analyst tracking; Enterprise ESG performance; Information transparency.

Abstract

ESG investment has increasingly become a mainstream investment concept. As the external supervisor and the carrier of "business signals", the analyst's analytical opinions have a great impact on investors' investment decisions. Based on China's Shanghai and Shenzhen A-share listed companies from 2009 to 2022 as research samples, this paper empirically tests the effect and mechanism of analyst tracking on enterprise ESG performance. It is found that analyst tracking can significantly improve the ESG performance of the enterprise. This conclusion is still robust after a series of tests, while the conclusion is still valid after the endogeneity problem is taken into account by the cross-cross term test. The mechanism shows that analyst tracking can improve the environmental, social and governance performance of enterprises by increasing the transparency of enterprises. The results of heterogeneity analysis show that the effect is more significant in state-owned enterprises, large-scale enterprises and companies that are not part of the CSI 300 index or are followed by non-star analysts. This paper provides a theoretical basis for investors to make investment decisions and for enterprises to improve their sustainable development capabilities.

Downloads

Download data is not yet available.

References

Lokuwaduge C S D S, Heenetigala K. Integrating environmental, social and governance (ESG) disclosure for a sustainable development: An Australian study. Business Strategy and the Environment. Vol. 26(2017) No. 4, p. 438-450.

Giese G, Lee L E, Melas D, et al. Foundations of ESG investing: How ESG affects equity valuation, risk, and performance. The Journal of Portfolio Management. Vol. 45(2019) No. 5, p. 69-83.

Duuren E V , Plantinga A , Scholtens B . ESG Integration and the Investment Management Process: Fundamental Investing Reinvented. Journal of Business Ethics. Vol. 138(2016) No. 3, p. 525-533.

Glooner S. ESG Risks and the Cross-Section of Stock Returns. SSRN Electronic Journal. 2017.

Chen J, Ding R, Hou W, et al. Do financial analysts perform a monitoring role in China? Evidence from modified audit opinions. Abacus. Vol. 52(2016) No. 3, p. 473-500.

Xu N, Chen J, Zhou F, et al. Corporate ESG and resilience of stock prices in the context of the COVID-19 pandemic in China. Pacific-Basin Finance Journal. Vol.79(2023), p. 102040.

Gillan S L, Koch A, Starks L T. Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance. Vol.66(2021). p. 101889.

Alareeni B A, Hamdan A. ESG impact on performance of US S&P 500-listed firms. Corporate Governance: The International Journal of Business in Society. Vol.20(2020) No.7, p. 1409-1428.

Velte P. The bidirectional relationship between ESG performance and earnings management. Empirical evidence from Germany. Journal of Global Responsibility. Vol. 10(2019) No.4, p.322-338.

Liu S, Jin J, Nainar K. Does ESG Performance Reduce Banks’ Nonperforming Loans?. Finance Research Letters. Vol. 55(2023), p. 103859.

Ge G, Xiao X, Li Z, et al. Does ESG Performance Promote High-Quality Development of Enterprises in China? The Mediating Role of Innovation Input. Sustainability. Vol. 14(2022) No.7, p.3843.

Yu F F. Analyst coverage and earnings management. Journal of financial economics. Vol. 88(2008) No. 2, p. 245-271.

Chen Wenting et al. Earnings Management, Information Disclosure and Being Acquired Again. Accounting Research. Vol. 401(2021) No. 3, p. 87-109.

Li K. Does information asymmetry impede market efficiency? Evidence from analyst coverage. Journal of Banking & Finance. Vol. 118(2020), p. 105856.

Li S, Ding F, Liu Q, et al. Can financial analysts constrain real earnings management in emerging markets? Evidence from China. Asia-Pacific Journal of Accounting & Economics. Vol. 29(2022) No.5, p. 1208-1226.

Bradshaw M T, Richardson S A, Sloan R G. The relation between corporate financing activities, analysts’ forecasts and stock returns. Journal of accounting and economics. Vol. 42(2006) No.1-2, p. 53-85.

YUAN Tian-rong, ZHAO Qing, SONG Li-jun. The Mispricing in the Capital Market, Analyst Following and the Choice of Means of Financing Mergers and Acquisitions. Humanities & Social Sciences Journal of Hainan University. Vol. 37(2019) No.4, p. 40-47.

Zhai Shengbao et al. Analyst Tracking and Audit Opinion Shopping. Accounting Research. Vol. 6(2016), p.86-93+95.

Yang L, Wang L, Ren X. Assessing the impact of digital financial inclusion on PM2. 5 concentration: evidence from China. Environmental Science and Pollution Research. Vol. 18(2022) No.(4), p. 1-8.

Yuan X , Li Z , Xu J , et al. ESG disclosure and corporate financial irregularities – Evidence from Chinese listed firms. Journal of Cleaner Production. Vol. 332(2022), p. 129992.

Murata R, Hamori S. ESG Disclosures and Stock Price Crash Risk. Journal of Risk and Financial Management. Vol. 14(2021) No.2, p. 70.

Crifo P, Forget VD, Teyssier S. The price of environmental, social and governance practice disclosure: An experiment with professional private equity investors. Journal of Corporate Finance. Vol. 30(2015), p. 168-194.

Eliwa Y, Aboud A, Saleh A. ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting. Vol. 79(2019), p. 102097.

Cai X, Hamori S, Yang L, et al. Multi-Horizon dependence between crude oil and East Asian stock markets and implications in risk management. Energies. Vol. 13(2020) No.2, p. 294.

Zhong Y, Zhao H, Yin T. Resource Bundling: How Does Enterprise Digital Transformation Affect Enterprise ESG Development?. Sustainability. Vol. 15(2023) No.2, p. 1319.

Hou J, Zhao S, Yang H. Individual analysts, stock return synchronicity and information efficiency. International Review of Financial Analysis. Vol. 71(2020), p. 101513.

Altschuler D, Chen G, Zhou J. Anticipation of management forecasts and analysts’ private information search. Review of Accounting Studies. Vol. 20(2015), p. 803-838.

Chen S, Chen X I A, Cheng Q. Do family firms provide more or less voluntary disclosure?. Journal of accounting research. Vol. 46(2008) No.3, p. 499-536.

Healy, P.M., Palepu, K.G. Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature. Journal of Accounting and Econnomics. Vol. 31(2001) No. 1-3, p. 405-440.

HUTTON, A. “Determinants of Managerial Earnings Guidance Prior to Regulation Fair Disclosure and Bias in Analysts’ Earnings Forecasts.” Contemporary Accounting Research. Vol. 22(2005), p. 867–914.

AJINKYA, B., AND M. J. GIFT. “Corporate Managers’ Earnings Forecasts and Symmetrical Adjustment of Market Expectations.” Journal of Accounting Research. Vol. 22(1984), p. 425–44.

Luo, Xiaowei Rose, Danqing Wang, and Jianjun Zhang. Whose call to answer: Institutional complexity and firms’ CSR reporting. Academy of management journal. Vol. 60(2017) No. 1, p. 321-344.

He J, Huang H H, Zhang S. Ambiguity Aversion, Information Acquisition, and Market Opacity. Annals of Economics and Finance. Vol. 21(2020) No.2, p. 263-329.

Murè P, Spallone M, Mango F, et al. ESG and reputation: The case of sanctioned Italian banks. Corporate Social Responsibility and Environmental Management. Vol. 28(2021) No.1, p. 265-277.

CHEN Xiaoshan, LIU Hongduo. Does Investor Attention Affect Corporate ESG Performance: Evidence rom Internet Search. Journal of Zhongnan University of Economics and Law. Vol. 2(2023), p. 15-27.

Jin S, Wang W, Zhang Z. The real effects of implicit government guarantee: Evidence from Chinese state-owned enterprise defaults. Management Science. Vol. 69(2022) No.6, p. 4483.

Buzby S L. Company size, listed versus unlisted stocks, and the extent of financial disclosure. Journal of accounting research. Vol. 13(1975) No.1, p. 16-37.

Cheng Q, Chen X, Lin A P, et al. A Star is Born: Star Analyst Voting and Analyst Research. Available at SSRN. (2021), p. 3875973.

Gao J, Wang J. Is working capital information useful for financial analysts? Evidence from China. Emerging Markets Finance and Trade. Vol. 53(2017) No.5, p. 1135-1151.

Lawson B P, Wang D. The earnings quality information content of dividend policies and audit pricing. Contemporary Accounting Research. Vol. 33(2016) No.4, p. 1685-1719.

Chen J, Cumming D, Hou W, et al. Does the external monitoring effect of financial analysts deter corporate fraud in China?. Journal of Business Ethics. Vol. 134(2016), p. 727-742.

Zhao Y, Mao J. Mixed ownership reforms and the transparency of nonstate‐owned enterprises: Evidence from China. Managerial and Decision Economics. Vol. 44(2023) No.1, p. 271-284.

To T Y, Navone M, Wu E. Analyst coverage and the quality of corporate investment decisions. Journal of Corporate Finance. Vol. 51(2018), p. 164-181.

Yu F F. Analyst coverage and earnings management. Journal of financial economics. Vol. 88(2008) No.2, p. 245-271.

Liu F, Zhang L. Executive turnover in China’s state-owned enterprises: Government-oriented or market-oriented?. China Journal of Accounting Research. Vol. 11(2018) No. 2, p. 129-149.

FACCIO M.Politically connected firms[J]. American Economic Review. Vol. 96(2006) No.1, p. 369- 386.

Drempetic S, Klein C, Zwergel B. The influence of firm size on the ESG score: Corporate sustainability ratings under review. Journal of Business Ethics. Vol. 167(2020), p. 333-360.

Lin Z, Wang L. Analyst following, financial constraint, and audit opinion shopping: from the perspective of earning management. Journal of International Financial Management & Accounting. Vol. 34(2023) No.1, p. 71-96.

Xiong W, Dong M, Xu C. Institutional Investors and Corporate Social Responsibility: Evidence from China. Emerging Markets Finance and Trade. Vol. 59(2022) No.10, p. 1-12.

Fang L H, Yasuda A. Are stars’ opinions worth more? The relation between analyst reputation and recommendation values. Journal of Financial Services Research. Vol. 46(2014), p. 235-269.