Do Chinese Firms' ESG Activities Mitigate Stock Price Crash Risk?

We investigate the impact of firms' Environmental, Social and Governance (ESG) activities on stock price crash risk during crises. We use the US–China trade war as a negative external shock and find that higher levels of ESG activities in Chinese firms help mitigate the crash risk. ESG activities help firms gain more resilience as a strategic tool for managing investor expectations by providing more information transparency and improving corporate governance. Further analysis shows that the mitigation effects are more pronounced for privately owned firms than their state-owned counterparts and for firms challenged by higher market competition than those facing lower competition.