Research on the relationship between ESG ratings and A-H premium — panel regression and investment strategy

Hongzhe Du, School of Mathematics and Physics, University of Xi’an Jiaotong-Liverpool, Suzhou, 215123, China,
Yi He, School of International Business School Suzhou, University of Xi’an Jiaotong-Liverpool, Suzhou, 215123, China
Jiayi Chen, School of Management and Business, Northeast Normal University, Changchun, 130024, China,
Volume9 nos.1 February 2025 ISSN 2755-3272

Keywords

ESG rating; investment strategy; A-H premium; Industry heterogeneity.

Abstract

In the context of Shanghai-Hong Kong Stock Connect, the country’s emphasis on ESG de- velopment has deepened, and the paper speculates that the company’s ESG rating can impact the A-H premium. This paper examines 81 corporations listed in mainland China and Hong Kong. It concludes with a strong negative correlation between ESG ratings and A-H premi- ums. This paper excludes some macro factors that can influence the A-H premium. It jointly analyses and concludes from the time series’ vertical dimension and the industry classifica- tion’s horizontal dimension. Based on the conclusion, the paper uses the change in ESG rating as an investment signal to formulate an investment strategy for A-shares and H-shares and can obtain above-market investment returns.