Environmental, Social, and Governance (ESG) Ratings and Stock Mispricing: A Moderated Mediation Model

Under the background of China’s high-quality economic development, improving the information efficiency of the capital market is a hot topic worthy of discussion. By using Minimum Bayes Factors (MBF), this study selected Chinese listed firms from 2010 to 2020 to investigate the impact of corporate ESG ratings on stock mispricing. We found that the effect of ESG ratings are negative and significance to stock mispricing, that better ESG ratings are related to lower stock mispricing. Mechanism analysis indicated that information asymmetry plays a mediating effect between ESG ratings and stock mispricing. Moreover, moderated mediation test showed that the indirect effect of ESG ratings on stock mispricing via information asymmetry is more negative and significant when the regional technical achievement (TAI) is higher. As a measurement to the regional technical achievement, this is the first time for the China’s provincial TAI has been calculated. The findings of our study enrich the existing literature on the effect of ESG ratings.