DOES ESG RATINGS PROMOTE CORPORATE GREEN INNOVATION? AN ANALYSIS BASED ON GMM AND HLM

Abstract

Corporate initiatives in green technology advancements are essential for improving sustainability; hence, the promotion of green innovation has gained academic interest. The primary aim of this research is to assess the influence of ESG ratings on the level of green innovation in China. Secondly, the current study finds the  significant determinants of ESG rating, environmental, social and governance determinants that affects the green innovation level. Thirdly, the present research examines the factors that most effectively highlight green innovation levels. This study analyzes Chinese A-share enterprises listed on the Shanghai and Shenzhen stock exchanges from 2014 to 2023. The researchers use Bloomberg ESG rating, CNRDS and CSMAR database for collection of data regarding variables. The researchers conduct descriptive summary, correlation matrix, Generalized Method of Moment (GMM) and Hierarchical Linear Model (HLM) tests. The GMM study results for China indicate that environmental factors and leverage decrease, while ESG ratings, social, governance, ROA, and growth greatly affect the amount of green innovation. The firm size and LTA show insignificant relation with green innovation. Based on green innovation, the HLM analysis's findings for China indicate that social account for the least change, while the governance exhibits the largest and environment the moderates change.