Analyst Coverage and Corporate ESG Performance

Abstract

In recent years, environmental, social, and governance factors (ESG) have played an increasingly significant role in the practice of corporate development of widespread concern. For corporate ESG, it is still necessary to consider the factors that influence the development of corporate ESG. This paper performed fixed-effect panel model analysis to investigate the relationship between analyst coverage and corporate ESG performance using data from China’s listed firms from 2011 to 2021. Our results showed that analyst coverage improves corporate ESG performance, especially the environmental (E) and social (S) dimensions, proving that analyst coverage is an important driving force behind corporate ESG engagement. The results were shown to be valid through a series of endogeneity and robustness checks. In the heterogeneity analysis, we showed that the promotion effects are more significant for state-owned firms and firms faced with greater financial constraints and higher information asymmetry. Furthermore, analyst coverage improves corporate ESG performance through the potential channels of attracting media attention and conducting site visits. Our study enriches the existing literature on the determinants of corporate ESG performance, and highlights the role analysts play in shaping corporate non-financial behavior and promoting corporate sustainable development.