Stock market liberalization and ESG performance: evidence from China connect

This study provides novel evidence on both macro and micro effects of stock market liberalization on firms' ESG performance based on the policy shock of stock market connect between mainland China and Hong Kong (China Connect). Through a staggered difference-in-differences framework, we find that the stock market liberalization has an ESG-enhancing effect. Furthermore, we show that the potential mechanisms include improved financing conditions and propagation of ESG concerns from global investors.