Observational analysis finds that ESG rating divergency increases stock price crash risk in firms, suggesting supply chain stability amplifies this effect.
Using a sample of A-share listed companies in China from 2015 to 2022, this study focuses on the supplier-focal firm-customer relationship to investigate the spillover effects of peer firms' (i.e. suppliers and customers) ESG rating divergency on the focal firm's stock price crash risk. We find that the peers' ESG rating divergency significantly increases a focal firm's stock price crash risk. Moreover, such spillover effects are more pronounced for firms that are in a more stable supply chain and that have higher information asymmetry.
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Nan-wei et al. (2025) studied this question.
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