ESP-3602

Published

2025-05-30

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Vol. 10 No. 5 (2025): Published

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Research Articles

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Copyright (c) 2025 Guo Li, Haoshan Chu, Yuanxin Liu

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How to Cite

Li, G., Chu, H., & Liu, Y. (2025). Research on the impact of environmental risk factors on pricing efficiency in China’s stock market. Environment and Social Psychology, 10(5), ESP-3602. https://doi.org/10.59429/esp.v10i5.3602

Research on the impact of environmental risk factors on pricing efficiency in China’s stock market

Guo Li

Business Analytics, University of Bristol，Bristol, BS8 1QU, UK

Haoshan Chu

Academic Department, Shanghai Wantyoung Education, Shanghai, 201700, China

Yuanxin Liu

Academic Department, Shanghai Wantyoung Education, Shanghai, 201700, China


DOI: https://doi.org/10.59429/esp.v10i5.3602


Keywords: environmental risk factors; market pricing efficiency; investor risk perception; Chinese stock market; behavioral finance

Abstract

This study examines the impact of environmental risk factors on market pricing efficiency in China's stock market from 2018 to 2024. Using a comprehensive panel dataset of 2,486 listed companies, the research constructs a multidimensional environmental risk index incorporating both physical and transition risks. The empirical analysis reveals that environmental risks significantly impair market efficiency through direct operational impacts and indirect investor perception channels. A one-standard-deviation increase in environmental risk leads to a 0.186-standard-deviation decrease in price synchronicity and a 0.224-standard-deviation increase in price delay. The investor risk perception channel accounts for approximately 35% of the total effect. Cross-sectional analysis shows that environmental risk effects are 1.5 times stronger in high-pollution industries compared to low-pollution sectors. These relationships remain robust after addressing endogeneity concerns through instrumental variable estimation and various robustness tests. The findings contribute to the growing literature on environmental finance and have important implications for improving environmental risk disclosure frameworks and market efficiency in emerging economies.

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