August 25, 2025Discover SustainabilityOpen Access

Textual analysis reveals ESG initiatives linked to idiosyncratic risk in China

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Textual analysis reveals ESG factors influence risk profiles in firms, indicating a need for improved reporting frameworks.

Significant reductions in idiosyncratic risk are linked to environmental governance and work safety initiatives, highlighting their protective role.
Corporate governance and employee security paradoxically increase idiosyncratic risk, underscoring the complexity of ESG factors.
Analysis utilized Lasso and principal component methods on reports from Chinese firms between 2010 and 2017 to assess risk dynamics.
Findings suggest that enhancing ESG disclosures can improve risk prediction, addressing endogeneity through robust methodological approaches.

Juan Wang (2025) studied this question.

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