Market Reaction to Corporate Governance Reform: Evidence From China

ABSTRACT Considering the market's different opinions on ESG, this study examines the market reaction to corporate governance reform within the context of ESG disclosure. By employing the event study methodology, it is demonstrated that the Chinese market exhibited an adverse reaction to the announcement of corporate governance reform. Furthermore, this study uses the ordinary least squares (OLS) model to demonstrate that ESG performance has a negative impact on cumulative abnormal return. It finds that the Chinese market had negative views about ESG disclosure. The findings have significant implications for the understanding of investor behavior and ESG‐related policies in emerging markets.