Esg alpha in china
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'ESG Alpha' in China. Michael L. Barnett a ; Xing Chen b ; Andreas G. F. Hoepner bc & Qian Li b a Said Business School, University of Oxford, Park End Street, Oxford, OX1 1HP, UK; b Centre for Responsible Banking & Finance, School of Management, University of St

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'ESG Alpha' in China

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Esg alpha in china

'ESG Alpha' in China

Michael L. Barnetta; Xing Chenb; Andreas G. F. Hoepnerbc & QianLib

a Said Business School, University of Oxford, Park End Street, Oxford, OX1 1HP, UK;

b Centre for Responsible Banking & Finance, School of Management, University of St

Andrews, The Gateway, North Haugh, St Andrews, KY16 9RJ, UK;

c Principles for Responsible Investment, PRI Secretariat, c/o UN Global Compact,

DC2-612, United Nations,New York, NY 10017, USA


Summary

  • We study the effect of ESG issues on the stock performance of Chinese firms based on RepRisk ESG news data, which is available since 2007

  • China is a special case, as firms listed in China have mainly Chinese investors while many Chinese firms are (also) listed outside China to attract western money

  • Preliminary findings:

    • Western investors react to some western ESG issues of Chinese companies listed in China

      • Knowing this can lead to abnormal returns of more than 10% p.a.

    • Chinese investors react strongly to Chinese ESG issues of Chinese companies listed in China

      • Knowing this can lead to abnormal returns of more than 15% p.a.

    • Investors do not react to western of chinese ESG issues of Chinese companies listed outside China

www.themegallery.com

Summary


Background

Background

  • Current Research Outline

    • The first research of ESG media coverage and financial performance in Chinese stock markets.

    • RepRisk data makes this possible.

      • 1806 Chinese companies on local and international listings over the period from 2006 to 2011.

      • 143 Chinese companies involved in 1219 issues matched with stock return data.


Chinese stock market

Chinese Stock Market


All share types of chinese firms

All Share types of Chinese firms

  • Chinese All Shares View


Only non a shares

Only non-A shares

  • Chinese Other Shares View


Data reprisk data

Data: RepRisk Data


Research questions

Data Analysis

Research Questions

In comparison with other countries, howESG issues

are perceived in China?

Literature Review

Data Analysis

  • How do westernESG

  • criteria affect Chinese

    A share companies?

  • How do ChineseESG

  • criteria affect Chinese

    A share companies?

  • How do westernESG

  • criteria affect Chinese

    non-A share companies?

  • How do ChineseESG

  • criteria affect Chinese

    non-A share companies?


Model

Model

  • Extended Carhart (1997) Four-Factor Model

rxp,t = portfolio’s excess return

αp = Jensen’s (1968) alpha

βnat,p, βreg,p, βglo,p= portfolio’s systematic exposure to the broad market portfolio on national, regional and global level, repectively.

rnat,t= market benchmark’s excess return on national level

γ, δ ,λ = the exposure of a portfolio to the small cap, value, and momentum investment styles.

SMB, HML, MOM= thereturnof a portfolioinvestinglong in smallstocks and shortselling large stocks, investinghigh booktomarketvaluestocks and shortsellinglowbooktomarketvaluestocks, and investinglong in winnerstocks and shortsellinglooserstocks, respectively

This 3-level Carhart four-factor model captures the designated portfolios’ exposures to regional and global equity markets (if any).


Results chinese a share

Results: Chinese A share

Note: ***, ** and * indicate statistical significance at 1%, 5% and 10% levels, respectively.


Results chinese non a share

Results: Chinese non-A share

Note: ***, ** and * indicate statistical significance at 1%, 5% and 10% levels, respectively.


Conclusions 1

Conclusions(1)


Esg alpha in china

The End.

Thank you for your attention!


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