ESG disclosure, investor sentiment and stock liquidity

Under the auspices of sustainable development and the “dual carbon” goal, corporate environmental, social and governance (ESG) has become a core non-financial performance indicator that shows the development potential of enterprises and profoundly influences the behavior of stakeholders. This paper is based on the data of A-share listed companies in China from 2010 to 2022, and uses the propensity score matching difference-in-difference (PSM-DID) method to examine the impact of corporate ESG disclosure on stock liquidity. Empirical results show that ESG disclosure solves the two pairs of contradictions in the principal–agent model of enterprises through the signaling theory and the reputation theory, and then improves the liquidity of stocks. The mechanism test shows that investor sentiment plays a positive mediating effect. The heterogeneity test shows that the type of ESG disclosure, pollution attributes, CEO duality, equity nature, and geographic location of firms all affect the promotion of stock liquidity by ESG disclosure.