Global Perspectives on Sustainable Finance: A study of ESG practices in China and the U.S

Abstract During the last few decades, considering ESG practices in business strategies has received great global importance, with increased institutional pressure and stakeholder and investors' focus on socially responsible investment to generate long-term benefits and value creation. By using data from Chinese and US public firms and by providing empirical evidence, this thesis contributes to the newly emerged scholarly works of ESG by exploring the intricate relationship between ESG factors and many aspects of firm behavior, performance, and transparency. Through an in-depth examination of three distinct scenarios, this research offers a detailed understanding of the dynamic interplay between ESG considerations and financial phenomena. Policymakers, investors, and corporate stakeholders will find this useful in navigating the dynamic fields of sustainable finance and ethical corporate governance. The first study looks at how stock price synchronization across Chinese A-share listed businesses is affected by ESG ratings between 2018 and 2020. Employing a fixed-effects model, the research empirically explores the association between ESG ratings and stock price synchronization, illuminating the mediating roles played by analyst attention and financial constraints. The results highlight ESG performance's role in improving stock price informativeness; manufacturing companies and non-SOEs exhibit a stronger correlation between lower stock price synchronization and higher ESG ratings. This study highlights the importance of integrating sustainability considerations into investment strategies and lays the foundation for the sustainable development of ESG philosophy within the Chinese capital market. It also advances our knowledge of the impact of ESG on financial outcomes. Taking data from the firms listed on the Chinese stock market from 2012 to 2019, the second study expands on the previous study's findings by examining the effect of green innovation on supply chain financing. Based on stakeholder theory, this study explains how green innovation boosts supply chain financing by raising companies' industry recognition among their peers. The study also emphasizes how regulatory frameworks, like the Green Credit Guideline, can act as a catalyst to strengthen the beneficial link between supply chain financing and green innovation, which is especially advantageous for state-owned companies (SOEs). These results highlight the critical role of companies' green initiatives in supporting their short-term financing capacities throughout the supply chain, particularly for companies that do not produce much pollution and have a high degree of environmental disclosure. The implications highlight the potential for synergy between environmental stewardship and financial performance and go beyond financial outcomes to include larger issues of sustainability and resilience in company initiatives. The third study shifts the focus to corporate ESG disclosure behavior and looks at how US S&P 500 firms' past ESG disclosure helps minimize the occurrence of adverse ESG events (ESG controversies). This study uses a regression analysis to examine how companies' ESG disclosure practices help in the wake of ESG scandals. It finds a pattern whereby companies' previous year's ESG disclosure helps to avoid the ESG controversies in the following year as a proactive reaction to investor expectations. The significance of transparent and responsible corporate practices in preserving stakeholder trust and reducing reputational risks is highlighted by this study, which also highlights how important it is for businesses to have proactive ESG disclosure policies that meet investor expectations. This research also examines the moderating effect of a corporate social responsibility committee on the associations between ESG disclosure policies and controversies. The results show that past ESG practices help firms experience fewer controversies next year. Furthermore, the existence of a CSR committee further reduces the frequency of these kinds of ESG scandals. Combining these results, this thesis advances our knowledge of the intricate relationship between company behavior, financial results, and ESG factors. In order to help policymakers, investors, and corporate stakeholders navigate the rapidly changing landscape of green finance and ethical business practices on a global scale, this research offers insightful implications by dissecting the mechanisms through which ESG factors influence stock price dynamics, supply chain financing, and corporate controversies. The results further emphasize how important it is for businesses to adopt sustainability as a primary means of value addition, understanding the relationship between sustainable practices and long-term financial performance.