The role of ESG in negative news

doi:10.21203/rs.3.rs-6365411/v1

This study examines the financial impact of workplace accidents on publicly listed Taiwanese firms, with a particular focus on stock market reactions and ESG-related factors. The findings reveal a significant negative market response to workplace accidents, as reflected in abnormal returns (AR) and cumulative abnormal returns (CAR). Investors penalize firms with inadequate workplace safety measures, leading to immediate stock price declines. However, ESG-adopting firms experience smaller market losses, suggesting that sustainability practices enhance resilience to operational risks.

Industry analysis indicates that sectors with inherently hazardous conditions, such as construction and shipping, report the highest accident incidence, highlighting the need for stringent safety regulations. Regression results show that firm size moderates market reactions, with larger firms experiencing less severe declines. Moreover, firms with high price-to-book (PB) ratios face stronger negative market reactions, implying heightened investor scrutiny.

A t-test comparing ESG-adopting and non-ESG firms finds no statistically significant difference in AR and CAR. However, ESG-adopting firms exhibit smaller negative reactions, supporting the role of ESG in mitigating financial risks. Companies with strong ESG performance exhibit resilience, mitigating financial losses. The findings emphasize workplace safety’s role in corporate stability and investor confidence, reinforced the importance of implementing ESG.

ESG

CSR

Workplace safety

Event study

In today's world, sustainable development is a critical global concern, emphasizing economic growth that does not harm the environment or the social well-being of future generations. Companies play a significant role in achieving these sustainability goals through ESG (Environmental, Social, Governance) criteria, which assess a company's environmental impact, social responsibility, and governance practices. The importance of ESG is evident as over 90% of global investors now include these criteria in their investment decisions (Serafeim & Yoon, 2022). Investors react negatively to poor ESG performance, highlighting the risks of reputational damage and financial losses for companies that fail to meet these standards (Krüger, 2015). Corporate social responsibility (CSR), encompassing ESG, has become a key focus in the business world. Companies are increasingly integrating sustainability into their operations, understanding that contributing to a sustainable future is crucial. Research suggests a positive correlation between CSR and corporate performance, with socially responsible companies often performing better financially and building stronger stakeholder relationships (Kim et al., 2014). In summary, the integration of ESG and CSR into business practices represents a fundamental shift in evaluating companies. Sustainability is now a critical expectation from investors, consumers, and employees. Companies that prioritize social responsibility and environmental stewardship will benefit from improved financial performance, enhanced brand reputation, and increased stakeholder engagement.

In the contemporary business landscape, the concept of CSR has gained significant prominence, with occupational health and safety as a critical focus (Koskela, 2014; Bautista-Bernal et al., 2024). Driven by ESG principles, companies recognize that employee well-being is essential to sustainability (Kirsten, 2024). Workplace safety is crucial, as highlighted by the International Labour Organization (ILO), reporting 380,000 fatal occupational injuries annually. Companies are finding that investing in occupational health and safety not only fulfills a moral obligation but also brings strategic benefits such as reduced accident costs, improved productivity, and enhanced employee morale. A comprehensive occupational health and safety strategy includes creating safe work environments, implementing robust safety protocols, providing adequate training, and establishing effective incident management systems. Additionally, companies must prioritize employees' mental and emotional well-being by fostering supportive work cultures, promoting work-life balance, and providing mental health resources. Integrating occupational health and safety into sustainability initiatives is vital for long-term success. This commitment not only enhances overall performance but also reflects a company’s values and dedication to responsible business practices (Jilcha & Kitaw, 2017; Kim & Park, 2021; Chen et al., 2023). In conclusion, prioritizing occupational health and safety is essential for sustainable development. Companies must create safe work environments, manage incidents effectively, and address both the physical and mental well-being of employees. This holistic approach leads to a more sustainable and responsible business model.

In the modern interconnected world, companies are under constant scrutiny, with the public, investors, and governments demanding ethical and responsible operations. This has heightened the emphasis on CSR, which includes a company's commitment to sustainable practices. Even well-intentioned companies can falter, and CSR disaster events, such as environmental pollution or labor exploitation, can severely impact a firm's value and stock performance (Górny, 2014 ; Katsikides, 2016 ; Kabir et al., 2018 ; Capelle-Blancard & Petit, 2019 ; Pérez et al., 2020).With the rise of social media and instant communication, negative news about CSR spreads rapidly, leading to rapid declines in investor confidence and stock prices (Kabir et al., 2018 ; Carpentier & Suret, 2021). Research shows that CSR disaster events significantly affect shareholder returns, with affected companies experiencing abnormal stock market performance. This decline is due to reputational damage, loss of public trust, regulatory scrutiny, and legal liabilities. Investors increasingly value companies that prioritize CSR, recognizing their potential for long-term sustainability and lower risk. Consequently, they are more likely to invest in companies with strong CSR records and divest from those with poor practices. In conclusion, CSR disaster events can drastically impact firm value and stock market returns. The modern world's transparency amplifies these consequences, making it crucial for companies to adopt ethical and sustainable practices. Adopting CSR allows companies to reduce risks, strengthen their reputation, attract investors, and contribute to a more sustainable future.

This research examines how workplace accidents and occupational diseases affect a company's market value, emphasizing the importance of occupational safety and health practices and ESG factors. The hypothesis is that negative occupational safety and health events, such as workplace accidents, significantly reduce market value by damaging reputation and decreasing investor confidence and consumer demand. The study also investigates whether companies with strong ESG and CSR practices experience less stock market volatility during negative occupational safety and Health events. It analyzes data from publicly listed companies, focusing on workplace accidents or diseases causing injuries or fatalities, using statistical methods to determine the correlation between these events and stock price changes. ESG data assesses the impact of CSR measures on stock volatility. Findings will guide businesses, investors, and policymakers. Companies can prioritize occupational safety and health practices and implement CSR measures to mitigate risks, investors can make informed decisions favoring companies with strong occupational safety and health records, and policymakers can develop regulations to encourage occupational safety and health and sustainable practices. This research underscores the importance of occupational safety and health in creating sustainable businesses, showing that prioritizing occupational safety and health and robust CSR practices enhances long-term value.

The structure of this paper is as follows: the first part is the introduction, the second part is the literature review, the third part is the research data and methods, the fourth part is the empirical results, and the final part is the conclusion.

2.1 The Rise of ESG: A Framework for Sustainable Business Practices

In today's rapidly evolving world, challenges like financial crises, climate change, and global infectious diseases demand attention. To address these issues, the concept of ESG emerged as an extension of CSR, offering a more comprehensive framework for long-term sustainability. Introduced formally in 2004, ESG principles marked a significant shift in business practices, particularly in Europe and America. ESG promotes coordinated development in environmental protection, social responsibility, and corporate governance, aiming to benefit shareholders, the wider community, and the environment (Garcia et al., 2017). ESG has gained global prominence, with businesses recognized as key players in sustainable development. This perspective reflects an understanding that companies must contribute to a more equitable and sustainable future, making ESG integration essential for long-term success. The origins of ESG lie in responsible investing, which incorporates ESG factors into investment strategies to evaluate corporate behavior and future financial performance. Investors seek companies committed to ethical and sustainable practices, fostering a resilient financial system. The adoption of ESG principles spans multinational corporations to small enterprises, driven by investor pressure, regulatory changes, and consumer demand for ethical products and services. Despite challenges like subjective measurement and "greenwashing," the momentum behind ESG continues to grow. In conclusion, ESG is a crucial framework for sustainable business practices. By integrating environmental protection, social responsibility, and good governance, companies can ensure long-term viability and contribute to a sustainable future (Landi & Sciarelli, 2019; Li et al., 2021; Weston & Nnadi, 2023).

2.2 The Vital Link Between Corporate Social Responsibility and Workplace Safety

CSR has become essential in the modern business landscape, with occupational health and safety as key components. Occupational health and safety covers the well-being of everyone in the workplace, addressing both physical environments and individual needs. The rise of ESG principles has emphasized the importance of workplace safety in social responsibility (Montero et al., 2009; Koskela, 2014). ESG frameworks and strict accident penalty laws highlight companies' roles in ensuring safe and healthy workplaces, reflecting the link between sustainability and corporate responsibility. Workplace safety is not just ethical but also vital for financial success (Kim & Park, 2021; Santa et al., 2020). Employees drive profitability, and a safe environment boosts their productivity and engagement. Prioritizing safety protects the workforce, a company’s most valuable asset (Dai et al., 2022). Enhancing workplace safety requires comprehensive training, supervision, and a strong safety culture. This includes educating employees to identify and mitigate hazards, ensuring clear communication, and fostering a safety-first workplace (Cohn & Wardlaw, 2016). Neglecting workplace safety has severe consequences, leading to injuries, fatalities, financial losses, and damaged reputations. Conversely, companies investing in safety programs benefit from reduced accident costs, higher employee morale, and improved business performance (Caskey & Ozel, 2017; Jilcha & Kitaw, 2017; Kabir et al., 2018). In conclusion, prioritizing workplace safety within CSR and ESG frameworks is essential for ethical, sustainable, and financially successful business practices.

2.3 The Complex Relationship Between Corporate Management and Workplace Safety

Employee well-being in the workplace involves more than just job provision, it encompasses physical safety, mental health, and overall well-being for both permanent and temporary workers (Koskela, 2014). One key factor influencing workplace safety is a company's financial health. Companies with higher internal debt are more aware of financial losses from employee injuries or illnesses, leading to a stronger commitment to safety (Wu et al., 2023). Corporate management behavior also significantly impacts workplace safety. Overconfident managers focused on rapid growth and aggressive R&D may increase workloads, compromising employee safety. In contrast, managers who prioritize prevention invest in safety training, implement robust protocols, and foster a safety-aware culture, reducing the likelihood of injuries. The research underscores a link between managerial decisions and workplace safety. While aggressive expansion can increase accident risks, higher debt levels can prompt a stronger focus on safety due to the financial repercussions of injuries (Haga et al., 2022; Qian et al., 2024). Creating a safer workplace requires understanding this interplay, promoting responsible management practices, and addressing financial pressures influencing decisions. This approach reduces occupational injuries and enhances workplace security and fulfillment for employees.

This research examines workplace safety in publicly listed companies in Taiwan that experienced accidents or occupational diseases causing employee injuries or fatalities from January 2005 to October 2023. Utilizing data from the Taiwan Economic Journal (TEJ) database, the study initially included 89 companies involved in workplace safety incidents and 176 companies affected by disasters or accidental events. After narrowing the focus to workplace-related incidents that resulted in injuries or fatalities among employees or relevant stakeholders reduced the sample size to 132 companies. Further refinement excluded non-publicly listed entities, resulting in a final sample of 127 companies.

The researchers verified reported incidents through thorough Google searches, ensuring data accuracy. The focus on publicly listed companies allows for a detailed analysis of the relationship between corporate performance and workplace safety, given their higher scrutiny and accountability.

The study aims to identify factors contributing to workplace accidents and occupational diseases and assess their impact on corporate performance and reputation. The findings will offer valuable insights for policymakers, corporate leaders, and stakeholders to enhance workplace safety and mitigate associated risks, contributing to the broader understanding of corporate social responsibility and its implications on business performance.

3.1 Dependent variable

This study investigates how the market reacts to negative news about CSR disasters, specifically workplace accidents, using the efficient market hypothesis as its foundation (Fama et al., 1969). We employ event study methodology to analyze the impact of such events on a company's stock price by comparing actual returns to expected returns before and after the event. We define the event day (t0) as the day the news is released or the next trading day if the disclosure occurs on a non-trading day. The focus is on identifying abnormal returns, the difference between actual and expected returns, using a risk-adjusted model. Our event window spans from one day before the news disclosure (t0-1) to five days after (t0 + 5), capturing both initial and potential long-term market responses. By analyzing abnormal returns within this window, we gain insights into investor perceptions and reactions to CSR disasters. This study contributes to understanding the financial implications of CSR issues, providing valuable information for companies and investors. It highlights the impact of workplace accidents on stock prices and offers practical implications for managing financial risks associated with CSR events. The formula is as follows:

$$\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:{R}_{it}={\alpha\:}_{i}+{\beta\:}_{i}{R}_{mt}+{\epsilon\:}_{it}$$

1

Where $\:{R}_{it}$ is the return rate of the company in period t, and $\:{R}_{mt}$ is the corresponding return rate of the stock market in period t. Calculating the difference between the actual return rate of the company within the event window and the expected return rate yields abnormal return rates :

$$\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:\:{AR}_{it}={R}_{it}-{E(R}_{it})$$

2

Where $\:{AR}_{it}$ is the abnormal return rate of the company in period t, $\:{R}_{it}$ is the actual return rate of the company in period t, and $\:{E(R}_{it})$ is the expected return rate of the company in period t. The estimation period ranges from − 15 days to -180 days, serving as the baseline, while the event period ranges from − 1 day to + 5 days for the maximum likelihood estimation of the estimation of the estimation period. In this study, we employ two event days to capture the market reaction on the day of negative news disclosure (trading day) and the following day, denoted as AR0 and AR1. Finally, the cumulative abnormal return (CAR) for each negative news disclosure event is calculated as the sum of daily abnormal returns within the event window [T1, T2] :

$$\:{CAR}_{i,t}=\sum\:_{{T}_{1}}^{{T}_{2}}{AR}_{it}$$

(3)

Where $\:{CAR}_{i,t}$ represents the cumulative abnormal return of the company in period t, and $\:{T}_{1}$ and $\:{T}_{2}$ denote the abnormal returns in the days before and after the event, respectively. In this study, we use three events to capture the market reaction following negative news disclosures, denoted as CAR(-1, 1), CAR(-1, 2), and CAR(-1, 3) (MacKinlay, 1997)。

3.2 Independent variable

This research delves into the intricate relationship between a company's financial performance and its commitment to social responsibility, specifically focusing on ESG factors. The study utilizes a comprehensive set of financial data sourced from the TEJ database to analyze the impact of various financial indicators on excess return rates. These indicators serve as control variables, allowing researchers to isolate the influence of ESG factors on company performance. Abnormal returns during the event window are not solely driven by the valuation effects of the event but can also be associated with the relationship between firm characteristics and the expected severity of the event (MacKinlay, 1997). One key control variable is firm size, measured by total assets. This variable reflects the economic resources a company possesses and tis potential to generate future benefits. Another key financial metric is the Price-to-Book (P/B) Ratio, which indicates how the market values a company compared to its book value. A higher P/B Ratio indicates that investors are prepared to pay a premium based on the company's future growth potential. The Debt Ratio, a measure of a company's financial leverage, provides insights into its long-term debt-paying ability. A higher Debt Ratio signifies a greater dependence on borrowed capital, potentially elevating the company’s financial risk. Conversely, the Current Ratio, which assesses a company's liquidity, reveals its capacity to fulfill short-term obligations. A higher Current Ratio indicates a stronger financial position and a reduced risk of default. The Total Asset Turnover Ratio, which gauges how effectively a company uses its assets, reflects its operational efficiency. A higher Total Asset Turnover Ratio signifies that a company is generating more revenue from its assets, indicating greater efficiency. Meanwhile, the Return on Assets (ROA), before tax and interest, measures a company's profitability by showing how much profit is generated per unit of investment. A higher ROA suggests effective asset utilization for profit generation. The Cash Flow Ratio, which assesses a company's ability to generate cash from its operations, reflects its cash flow generation capability. A higher Cash Flow Ratio signals a stronger financial position and a better capacity to meet financial obligations. Company R&D expenditure assesses the costs incurred for developing new products, technologies, or innovations and is considered an investment in maintaining long-term competitiveness. Higher R& D investment may lead to greater future returns. Finally, the study incorporates ESG-related variable, including the Environmental Protection Score (E score), Social Responsibility Score (S score), Corporate Governance Score (G score), as well as the Employee Health Score (Health score) and Fairness Score (Fair score), both of which are closely linked to social responsibility. The E score, with a maximum of 100 points, evaluates a company’s environmental performance. Companies may experience incidents such as fires or gas explosions, which not only lead to air pollution but also cause casualties among employees and other stakeholders. The S score, also on a 100-point scale, measures a company’s commitment to its employees and its engagement in social responsibility, encompassing aspects such as labor practices, human rights, and community involvement. The G score, similarly ranging up to 100 points, assesses corporate governance, focusing on transparency, accountability, and fairness in corporate operations. The Health score evaluates factors related to employee health and safety, while the Fair score measures aspects of human rights and fairness. By analyzing the relationship between these firm characteristics and ESG variables, the study aims to explore the impact of corporate social responsibility on firm performance. The findings of this research will provide valuable insights for investors, policymakers, and businesses seeking to understand the link between ESG factors and financial success.

In today's business world, ESG sustainability is crucial. Taiwan is aligning its practices with international standards through the TESG sustainable development index, which measures the sustainability performance of Taiwanese companies. The TESG index follows Global Reporting Initiative (GRI) guidelines and evaluates sustainability across three pillars: Environment, Social, and Governance. It uses sixteen quantifiable variables, including greenhouse gas emissions, energy management, waste control, community relations, data security, product quality, employee health and safety, diversity, innovation, leadership, and governance transparency. Quantitative analysis techniques and the degree of information disclosure, combined with international ESG standards, drive corporate ESG development. The more detailed a company’s ESG disclosures, the better its ESG improvements can be estimated. If these disclosures are assured or verified by auditors or third parties, the company is more likely to attain a higher rating. Companies are rated on a scale from A + to C-, with A + and A indicating industry leaders, B + to B- reflecting average performance, and C to C- showing lower sustainability efforts. This index helps companies improve their practices and offers investors a clear framework for assessing potential investments. The TESG index promotes transparency and accountability, encouraging companies to adopt sustainable practices and contributing to Taiwan’s alignment with global sustainability goals.

Based on the description of the control variables above, using event study methodology and Ordinary Least Squares (OLS) regression model, the formula is:

In this context, ’i ‘ in $\:{CAR}_{i,t}$ represents the company. ’t ‘ represents the day of negative news disclosure (trading day if applicable) or the next day following the negative news disclosure (non-trading day). The $\:{CAR}_{i,t}$ is divided into CAR(-1, 1), CAR(-1, 2), and CAR(-1, 3), The $\:{log(TA}_{i,t-1})$ represents the natural logarithm of the company’s total assets. $\:{S\:score}_{i,t-1}\_Dummy$, $\:{E\:score}_{i,\:t-1}\_Dummy$, $\:{G\:score}_{i,\:t-1}\_Dummy$, $\:{Health\:score}_{i,t}\_Dummy$ and $\:{Fair\:score}_{i,\:t-1}\_Dummy$. Where ‘Dummy’ is a dummy variable. If it's grade A for a company, it's 1; otherwise, it's 0. If it's grade B for a company, it's 1; otherwise, it's 0. If it's grade C for a company, it's 1; otherwise, it's 0. The remaining control variables have been described previously.

Table 1 shows the disclosure dates of news events caused by workplace accidents or occupational diseases leading to employee casualties for Taiwanese listed companies, categorized by TSE industry, and year from January 2005 to October 2023. The TSE industries are based on the Taiwan Stock Exchange industry category guidelines. The analysis identified 127 incidents across various industries. The building materials and construction industries, along with shipping, had the highest number of accidents, with 15 and 16 cases, respectively. The plastics, steel, and semiconductor industries also reported notable numbers of incidents. Some industries, such as food, textiles, electrical machinery, rubber, automotive, communication networks, and electronic distribution, reported only a single accident, highlighting potential but less frequent risks. Additionally, the "other industries" category had two reported accidents, showing the need for broad safety measures. These findings underlined the critical need for robust safety protocols and targeted risk management strategies to protect employees and improve workplace safety across all sectors. The building materials and construction sector consistently shows high rates of workplace accidents and fatalities. Construction work's inherent dangers, including heavy machinery, hazardous materials, and precarious conditions, contribute to this risk (Shafique & Rafiq, 2019; Hsieh et al., 2020; Liao & Chiang, 2022). Similarly, international shipping is another high-risk industry, with the unpredictability of maritime work and the handling of heavy cargo leading to high rates of fatalities, injuries, and mental health issues among seafarers (Hetherington et al., 2006; Devereus et al., 2020). Therefore, this study indicates that accidents occur most frequently in the building materials and construction industry as well as the shipping industry. This finding aligns with the literature, which consistently identifies the construction and international shipping industries as having the highest accident rates and being among the most dangerous sectors.

Table 1

The distribution of news events disclosed from January 2005 to October 2023 regarding workplace accidents or occupational diseases among employees of Taiwanese listed companies, categorized by industry and year.
Industry	2005	2006	2007	2009	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	Total
Cement	0	0	0	0	0	0	0	0	0	0	1	0	1	2	1	1	1	7
Plastic	0	0	0	0	1	1	1	1	1	0	0	0	0	1	1	2	1	10
Papermaking	0	0	0	0	0	0	0	0	0	0	0	1	0	0	0	1	0	2
Steel	0	0	1	0	0	0	0	1	1	1	0	1	1	1	2	1	0	10
Build	0	1	0	0	0	1	0	2	3	0	0	1	0	0	3	0	4	15
Shipping	0	0	0	0	0	2	0	2	2	1	1	0	1	2	4	0	1	16
Other	0	0	0	0	0	1	0	1	0	1	0	1	1	1	1	1	1	9
Chemical	0	0	0	0	0	0	0	0	1	2	0	0	0	0	0	0	1	4
Biological Technology	0	0	0	0	0	1	0	1	0	1	0	0	1	2	0	0	1	7
Oil, Electricity and Gas	0	1	0	0	0	0	0	1	0	0	0	0	1	0	0	0	0	3
Semiconductor	0	0	0	0	0	0	0	0	0	0	2	0	2	2	2	3	0	11
Computer Peripherals	0	0	0	0	0	0	0	0	1	0	0	0	1	0	0	0	1	3
Photoelectric	1	0	0	1	0	0	0	0	0	1	1	0	1	1	0	0	1	7
Electronic Components	0	1	0	0	1	0	1	0	2	0	1	1	0	0	0	0	2	9
Other Electronics	0	0	0	0	0	1	0	1	0	0	1	1	0	0	2	2	0	8
Green Energy	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	1	2	3
Sports and Leisure	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	3	3
Total	1	3	1	1	2	7	2	10	11	7	7	6	10	12	16	12	19	127

The Table 2 shows Descriptive Statistics, including AR, CAR, TA, PB, Debt Ratio, Current, Turnover, ROA, Cash flow and R&D. The average values for AR0 and AR1 are − 0.8264% and − 0.4979%, respectively, indicating a slight negative trend in the data. The average values for CAR (-1, 1), CAR (-1, 2), and CAR (-1, 3) are all negative, ranging from − 1.4988%, -1.9482%, and − 2.1732%, suggesting a more pronounced negative trend in cumulative returns. Examining the minimum values provides further insights into the potential downside risk. The minimum values for AR0 and AR1 are − 10.9481%, and − 11.0050%, respectively, highlighting the possibility of significant negative returns. Similarly, the minimum values for CAR (-1, 1), CAR (-1, 2), and CAR (-1, 3) are − 20.7478%, -31.4068% and − 41.4530%, indicating a greater potential for substantial losses in cumulative returns. Conversely, the maximum values for AR0 and AR1 are 9.1448% and 7.3406%, CAR (-1, 1), CAR (-1, 2), and CAR (-1, 3) are 15.7888%, 14.8671%, and 16.3550%, respectively, suggesting a limited upside potential. Finally, the median values provide a measure of central tendency. The median values for AR0 and AR1 are − 0.5786% and 0.0308%, respectively, indicating that half of the data points fall below these values. The median values for CAR (-1, 1), CAR (-1, 2), and CAR (-1, 3) are − 0.7661%, -0.9177%, and − 0.8522%, suggesting a general tendency towards negative cumulative returns.

Table 2

Descriptive Statistics
variable	Mean	Median	Maximum	Minimum	Std. Dev.	Observations
AR0	-0.8264	-0.5786	9.1448	-10.9481	2.9560	127
AR1	-0.4979	-0.0308	7.3406	-11.0050	2.7208	127
CAR(-1, 1)	-1.4988	-0.7661	15.7888	-20.7478	5.2235	127
CAR(-1, 2)	-1.9482	-0.9177	14.8671	-31.4068	6.3864	127
CAR(-1, 3)	-2.1732	-0.8522	16.3550	-41.4530	7.1343	127
TA(Million)	232550.1	25866	3378495	432	580630.1	127
PB	1.9267	1.4900	9.0400	0.3600	1.5588	127
Debt	46.4584	49.2000	81.5900	12.0700	16.5581	127
Current	198.6249	172.0900	907.4900	62.9000	113.2206	127
TA Turnover	0.7480	0.6100	2.1100	0.0500	0.4474	127
ROA	7.6384	6.3900	37.4000	-25.4900	8.8167	127
Cash Flow	0.3655	0.2754	1.6854	-1.4628	0.5214	127
R&D(Million)	106741.4	757.2	5335196	0	517383	127

In finance, information flow significantly impacts market movements, particularly stock prices. This passage examines how negative news events influence stock prices and investor reactions. A graph (Fig. 1) illustrates this impact, with the horizontal axis representing the period from one day before to five days after the news, and the vertical axis showing the percentage change in stock price. The blue line depicts the average abnormal return rate, while the red line represents the average cumulative abnormal return. On the announcement day, both rates drop significantly, reflecting investors' immediate negative reaction. In the following days, the abnormal return rate shows signs of recovery as investors reassess the news, while the cumulative abnormal return continues to decline, indicating sustained negative effects. This pattern highlights the lasting impact of negative news on stock prices despite initial overreactions. Understanding these market dynamics is essential for investors to make informed decisions and navigate the financial landscape effectively.

In the realm of finance, the impact of negative news on stock market behavior is a subject of considerable significance and extensive study. The rapid dissemination of information via the Internet often precipitates emotional responses, leading to impulsive decisions by investors. De Bondt and Thaler (1985) demonstrated that investors tend to overreact to negative news, resulting in an initial decline in stock prices, which is followed by a gradual recovery. Similarly, research by Boubaker et al. (2015) identified a pattern of negative abnormal returns in the wake of terrorist attacks, with a subsequent rebound on the fourth day. Empirical data, illustrated in Fig. 1, corroborates these findings by depicting a pronounced decline in both average abnormal returns and cumulative abnormal returns on the day of the news release, followed by a complete recovery by the fourth day. This pattern underscores the phenomenon of initial overreaction succeeded by a phase of rational adjustment. The propensity for overreaction can be attributed to several factors, including cognitive biases, emotional influences, and herd behavior. Cognitive biases, such as the availability heuristic, lead investors to overestimate the significance of recent negative events. Emotional influences, such as fear and anxiety, further drive irrational decision-making. Additionally, herd behavior amplifies the impact of negative news, as investors tend to mimic the actions of their peers. Understanding these behavioral tendencies is essential for investors aiming to make well-informed decisions and avoid emotional biases.

Table 3 presents the AR from the event day to three days post-event, which are significantly negative, indicating that the market reacts negatively to workplace safety incidents, with a short-term significant impact. Firm size is significantly positive for AR0 = 0.3282 (p < 5%), CAR (-1, 1) = 0.5980 (p < 5%), CAR (-1, 2) = 0.7385 (p < 5%), and CAR (-1, 3) = 0.9102 (p < 1%), suggesting that larger firms experience a more moderate market reaction, with a smaller impact on their stock prices in the three days following the incident. The price-to-book (PB) ratio is significantly negative at CAR (-1, 3) = -0.8571 (p < 10%), implying that firms with higher investor expectations experience a more pronounced negative market reaction to workplace safety incidents. Return on assets (ROA) is significantly negative at AR0 = -0.0976 (p < 5%), suggesting that highly profitable firms are more susceptible to immediate negative market reactions on the event day. The results of this study are consistent with the findings reported by Kabir, Q. S., Watson, K., & Somaratna, T. (2018).

Table 3

Event study methodology on workplace accidents or occupational diseases.
Variable	AR 0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
C	-4.3259	-4.7190	-8.6405	-7.5656	-11.3560
	(-2.0551**)	(-2.3762**)	(-2.3300**)	(-1.6622*)	(-2.2352**)
LOG_TA(Million)	0.3282	0.1956	0.5980	0.7385	0.9102
	(2.2867**)	(1.4445)	(2.3653**)	(2.3797**)	(2.6276***)
PB	0.0510	-0.1303	-0.4202	-0.6199	-0.8571
	(0.2549)	(-0.6904)	(-1.1924)	(-1.4331)	(-1.7751*)
Debt	0.0059	0.0177	0.0122	-0.0005	0.0225
	(0.2834)	(0.8975)	(0.3313)	(-0.0107)	(0.4460)
Current	0.0031	0.0043	0.0045	0.0055	0.0049
	(1.1224)	(1.6553)	(0.9129)	(0.9189)	(0.7250)
TA Turnover	0.5898	0.5129	0.9562	0.6208	0.8614
	(0.9348)	(0.8616)	(0.8602)	(0.4550)	(0.5656)
ROA	-0.0976	-0.0203	-0.1255	-0.1388	-0.0995
	(-2.4329**)	(-0.5367)	(-1.7752)	(-1.5993)	(-1.0270)
Cash Flow	-0.2470	-0.2904	-0.0345	-0.3539	-0.2199
	(-0.3858)	(-0.4808)	(-0.0306)	(-0.2557)	(-0.1424)
R&D(Million)	0.0000	0.0000	0.0000	0.0000	0.0000
	(-0.5758)	(0.2211)	(-0.1934)	(-0.1982)	(-0.5614)
Fixed year	Yes	Yes	Yes	Yes	Yes
R²	0.1152	0.0704	0.1206	0.1137	0.1151
F-statistic	1.6918*	0.9840	1.7821*	1.6676	1.6905*
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

Workplace accidents have significant impacts on companies, affecting not only stock prices but also corporate reputation, credibility, and causing considerable harm to investors and stakeholders. Since the implementation of ESG in 2015, it is worth examining whether there is a difference in AR associated with workplace accidents between companies that adopted ESG practices and those that did not. A t-test was conducted to compare the abnormal returns of non-ESG and ESG-adopting companies when workplace accidents occurred.

As shown in Table 4, on the event day (AR0), the abnormal return for non-ESG companies was − 0.8921, while that for ESG-adopting companies was − 0.7904. The t-statistic was − 0.1848 (p-value > 10%), indicating no statistical significance. On the following day (AR1), the abnormal return for non-ESG companies was − 0.6871, compared to -0.3941 for ESG-adopting companies, with a t-statistic of -0.5790 (p-value > 10%), also not significant. For the cumulative abnormal returns over the event window (-1, + 1), CAR (-1, 1) was − 2.0489 for non-ESG companies and − 1.1969 for ESG-adopting companies, with a t-statistic of -0.8784 (p-value > 10%), showing no statistical significance.

Although the results are not statistically significant, it is evident that ESG-adopting companies experienced less negative abnormal returns and cumulative abnormal returns compared to non-ESG companies. This suggests that companies with ESG practices place greater emphasis on workplace safety and accident prevention.

Table 4

Comparison of company abnormal returns before and after ESG implementation on workplace accidents
Characteristics	Observations	AR0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
No ESG firms	45	-0.8921	-0.6871	-2.0489	-1.9243	-2.2173
ESG firms	82	-0.7904	-0.3941	-1.1969	-1.9613	-2.1490
t-Statistic		(-0.1848)	(-0.5790)	(-0.8784)	(0.0311)	(-0.0514)
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

Table 5 examines the impact of workplace safety incidents on environmental scores by incorporating ESG-related control variables in the regression model. The coefficients for firms with A and C environmental ratings are negative but not statistically significant, while the coefficient for firms with a B rating is positive but also not significant. These results suggest that workplace safety incidents do not significantly affect environmental scores across different environmental rating levels.

Table 5

The impact of workplace accidents or occupational diseases on Environmental scores.
variable	AR 0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
C	-4.0549	-4.0906	-6.5774	-5.6196	-9.5594
	(-1.7963*)	(-1.8308*)	(-1.6143)	(-1.1230)	(-1.7028*)
LOG_TA(Million)	0.2480	0.1252	0.4173	0.5599	0.7085
	(1.5716)	(0.8018)	(1.4651)	(1.6007)	(1.8054*)
PB	-0.0944	-0.1726	-0.6408	-0.8922	-1.0587
	(-0.4440)	(-0.8205)	(-1.6701*)	(-1.8932*)	(-2.0024**)
Debt	0.0139	0.0203	0.0243	0.0113	0.0346
	(0.6778)	(0.9992)	(0.6564)	(0.2485)	(0.6773)
Current	0.0025	0.0033	0.0027	0.0028	0.0014
	(0.8695)	(1.1692)	(0.5315)	(0.4431)	(0.1931)
TA Turnover	0.5863	0.4700	0.7548	0.5266	0.6938
	(0.9321)	(0.7548)	(0.6648)	(0.3776)	(0.4434)
ROA	-0.0655	-0.0164	-0.0918	-0.0958	-0.0687
	(-1.5628)	(-0.3953)	(-1.2133)	(-1.0314)	(-0.6590)
Cash Flow	-0.1703	-0.3563	-0.0215	-0.4509	-0.4368
	(-0.2460)	(-0.5202)	(-0.0172)	(-0.2939)	(-0.2538)
R&D(Million)	0.0000	0.0000	0.0000	0.0000	0.0000
	(-0.5763)	(0.2137)	(-0.2368)	(-0.2793)	(-0.5936)
E score_Dummy A	-0.0308	-0.0178	-0.0569	-0.1028	-0.0969
	(-0.9464)	(-0.5529)	(-0.9698)	(-1.4247)	(-1.1974)
E score_Dummy B	0.0071	-0.0150	0.0155	0.0141	0.0002
	(0.2546)	(-0.5468)	(0.3099)	(0.2283)	(0.0035)
E score_Dummy C	-0.0018	-0.0144	-0.0317	-0.0120	-0.0462
	(-0.0564)	(-0.4464)	(-0.5396)	(-0.1658)	(-0.5700)
S score	0.0427	0.0253	0.0852	0.0921	0.1240
	(1.2787)	(0.7653)	(1.4135)	(-1.2440)	(1.4931)
G score	0.0225	0.0412	0.0799	0.1095	0.1251
	(0.6474)	(1.1960)	(1.2733)	(1.4210)	(1.4467)
Health score	-0.0054	-0.0015	-0.0135	-0.0191	-0.0334
	(-0.3303)	(-0.0943)	(-0.4574)	(-0.5262)	(-0.8184)
Fair score	-0.0429	-0.0256	-0.0809	-0.0913	-0.0930
	(-1.8010*)	(-1.0859)	(-1.8824*)	(-1.7289*)	(-1.5695)
Fixed year	Yes	Yes	Yes	Yes	Yes
R²	0.1482	0.1006	0.1749	0.1635	0.1719
F-statistic	1.185	0.7617	1.444	1.3315	1.4146
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

Table 6 explores the impact of workplace safety incidents on social scores. For firms with a B rating, social scores are significantly positive at CAR (-1, 1) = 0.0880 (p < 10%) and CAR (-1, 3) = 0.1056 (p < 10%), indicating that these firms demonstrate greater resilience in maintaining their social standing despite workplace safety incidents. The coefficient for firms with an A rating is positive but not significant, suggesting that these firms can effectively manage such events. In contrast, the coefficient for firms with a C rating is negative but not significant, indicating that the market perceives their CSR efforts more negatively when workplace safety incidents occur.

Table 6

The impact of workplace accidents or occupational diseases on Social scores.
variable	AR 0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
C	-4.7501	-4.5999	-8.1076	-7.1003	-11.7300
	(-2.1087**)	(-2.0798**)	(-2.0013**)	(-1.4087(	(-2.0814**)
LOG_TA(Million)	0.2839	0.1668	0.5151	0.6815	0.8824
	(1.8819*)	(1.1257)	(1.8985*)	(2.0188**)	(2.3377**)
PB	-0.1219	-0.1848	-0.6932	-0.9622	-1.1800
	(-0.5815)	(-0.8980)	(-1.8394*)	(-2.0520**)	(-2.2506**)
Debt	0.0169	0.0209	0.0293	0.0127	0.0400
	(0.8101)	(1.0215)	(0.7812)	(0.2723)	(0.7672)
Current	0.0020	0.0025	0.0014	0.0022	0.0005
	(0.6935)	(0.9032)	(0.2804)	(0.3489)	(0.0719)
TA Turnover	0.6191	0.4070	0.8034	0.4996	0.7464
	(0.9875)	(0.6613)	(0.7126)	(0.3562)	(0.4759)
ROA	-0.0605	-0.0104	-0.0781	-0.0788	-0.0505
	(-1.4467)	(-0.2530)	(-1.0379)	(-0.8417)	(-0.4821)
Cash Flow	0.0536	-0.1769	0.4356	0.1105	0.3657
	(0.0789)	(-0.2654)	(0.3568)	(0.0728)	(0.2153)
R&D(Million)	0.0000	0.0000	0.0000	0.0000	0.0000
	(-0.6237)	(0.1978)	(-0.3003)	(-0.3329)	(-0.6977)
E score	-0.0143	-0.0372	-0.0466	-0.0279	-0.0672
	(-0.4738)	(-1.2553)	(-0.8592)	(-0.4127)	(-0.8897)
S score_Dummy A	0.0035	0.0354	0.0325	0.0182	0.0121
	(0.1087)	(1.1245)	(0.5638)	(0.2529)	(0.1506)
S score_Dummy B	0.0412	0.0290	0.0880	0.0665	0.1056
	(1.6279)	(1.1674)	(1.9312*)	(1.1730)	(1.6662*)
S score_Dummy C	-0.0118	-0.0370	-0.0477	-0.0513	-0.0494
	(-0.3947)	(-1.2579)	(-0.8854)	(-0.7660)	(-0.6597)
G score	0.0131	0.0329	0.0532	0.0921	0.0922
	(0.3665)	(0.9383)	(0.8282)	(1.1538)	(1.0325)
Health score	0.0017	-0.0037	-0.0025	-0.0061	-0.0129
	(0.1014)	(-0.2237)	(-0.0813)	(-0.1619)	(-0.3055)
Fair score	-0.0439	-0.0265	-0.0806	-0.0933	-0.0978
	(-1.8684*)	(-1.1520)	(-1.9090*)	(-1.7758*)	(-1.6663*)
Fixed year	Yes	Yes	Yes	Yes	Yes
R²	0.1514	0.1183	0.1840	0.1510	0.1652
F-statistic	1.2156	0.9141	1.5361	1.2119	1.3481
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

Table 7 examines the impact of workplace safety incidents on corporate governance scores. The coefficients for firms with A, B, and C governance ratings are all insignificant, suggesting that corporate governance scores do not experience significant changes following workplace safety incidents. This may indicate that corporate governance scores are influenced by other ESG-related control variables rather than workplace safety incidents alone.

Table 7

The impact of workplace accidents or occupational diseases on Governance scores.
variable	AR 0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
C	-4.2166	-4.2417	-7.3839	-6.8205	-11.1720
	(-1.8547*)	(-1.8793*)	(-1.7808*)	(-1.3330)	(-1.9475*)
LOG_TA(Million)	0.2522	0.1470	0.4804	0.6521	0.8454
	(1.6307)	(0.9576)	(1.7033*)	(1.8737*)	(2.1664**)
PB	0.0159	-0.0706	-0.4879	-0.6735	-0.8568
	(0.0720)	(-0.3216)	(-1.2096)	(-1.3532)	(-1.5354)
Debt	0.0131	0.0192	0.0245	0.0114	0.0355
	(0.6347)	(0.9347)	(0.6480)	(0.2449)	(0.6793)
Current	0.0031	0.0038	0.0047	0.0060	0.0052
	(1.0757)	(1.3091)	(0.8821)	(0.9158)	(0.7113)
TA Turnover	0.5315	0.3427	0.7184	0.4221	0.6536
	(0.8357)	(0.5428)	(0.6194)	(0.2949)	(0.4073)
ROA	-0.0765	-0.0255	-0.1060	-0.1201	-0.0959
	(-1.7667*)	(-0.5929)	(-1.3424)	(-1.2329)	(-0.8785)
Cash Flow	-0.1574	-0.2562	0.0630	-0.2452	-0.1660
	(-0.2308)	(-0.3785)	(0.0507)	(-0.1598)	(-0.0965)
R&D(Million)	0.0000	0.0000	0.0000	0.0000	0.0000
	(-0.4326)	(0.3278)	(-0.1451)	(-0.1682)	(-0.5190)
E score	0.0035	-0.0159	-0.0104	0.0065	-0.0232
	(0.1174)	(-0.5423)	(-0.1927)	(0.0975)	(-0.3099)
S score	0.0479	0.0387	0.0961	0.0925	0.1217
	(1.3884)	(1.1287)	(1.5271)	(1.1909)	(1.3973)
G score_Dummy A	0.0009	0.0222	-0.0019	-0.0175	-0.0319
	(0.0279)	(0.6966)	(-0.0320)	(-0.2426)	(-0.3941)
G score_Dummy B	0.0073	-0.0054	0.0104	0.0281	0.0379
	(0.2135)	(-0.1606)	(0.1671)	(0.3674)	(0.4421)
G score_Dummy C	-0.0355	-0.0295	-0.0313	-0.0463	-0.0441
	(-0.9348)	(-0.7808)	(-0.4516)	(-0.5416)	(-0.4602)
Health score	-0.0074	-0.0051	-0.0152	-0.0239	-0.0363
	(-0.4486)	(-0.3074)	(-0.5023)	(-0.6426)	(-0.8701)
Fair score	-0.0218	-0.0088	-0.0415	-0.0345	-0.0306
	(-0.8737)	(-0.3556)	(-0.9113)	(-0.6138)	(-0.4849)
Fixed year	Yes	Yes	Yes	Yes	Yes
R²	0.1450	0.0917	0.1545	0.1346	0.1444
F-statistic	1.1552	0.6878	1.2447	1.0598	1.1500
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

Table 8 investigates the impact of workplace safety incidents on employee health and safety scores. The coefficient for B-rated firms at CAR (-1, 1) = 0.0436 (p < 10%) is significantly positive, implying that these firms experience minimal negative effects on their employee health and safety ratings. This could be attributed to strong pre-existing safety measures and crisis management capabilities. Conversely, the coefficient for C-rated firms is negative but not significant, suggesting that firms with lower ratings in this category require enhanced regulatory oversight and supervision to ensure continuous improvement in employee health and safety conditions.

Table 8

The impact of workplace accidents or occupational diseases on Health scores.
variable	AR 0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
C	-4.1647	-4.2161	-7.0549	-6.1911	-10.1758
	(-1.8786*)	(-1.9279*)	(-1.7675*)	(-1.2415)	(-1.8302*)
LOG_TA(Million)	0.2335	0.1260	0.4119	0.5899	0.7362
	(1.6143)	(0.8828)	(1.5813)	(1.8129*)	(2.0293**)
PB	-0.0891	-0.1883	-0.6572	-0.9206	-1.1090
	(-0.4297)	(-0.9207)	(-1.7603*)	(-1.9737*)	(-2.1324**)
Debt	0.0161	0.0222	0.0303	0.0157	0.0403
	(0.7797)	(1.0899)	(0.8170)	(0.3385)	(0.7787)
Current	0.0012	0.0020	0.0005	0.0011	-0.0011
	(0.4137)	(0.7068)	(0.1000)	(0.1716)	(-0.1462)
TA Turnover	0.6353	0.4794	0.8991	0.6125	0.8621
	(1.0313)	(0.7889)	(0.8107)	(0.4421)	(0.5581)
ROA	-0.0648	-0.0162	-0.0883	-0.0873	-0.0634
	(-1.5935)	(-0.4028)	(-1.2065)	(-0.9541)	(-0.6214)
Cash Flow	-0.0460	-0.1767	0.3132	-0.0248	0.1597
	(-0.0682)	(-0.2654)	(0.2577)	(-0.0163)	(0.0943)
R&D(Million)	0.0000	0.0000	0.0000	0.0000	0.0000
	(-0.5781)	(0.2092)	(-0.2672)	(-0.3241)	(-0.6644)
E score	-0.0278	-0.0497	-0.0727	-0.0610	-0.1052
	(-0.9277)	(-1.6797*)	(-1.3453)	(-0.9044)	(-1.3979)
S score	0.0421	0.0205	0.0768	0.0734	0.1004
	(1.3578)	(0.6698)	(1.3762)	(1.0533)	(1.2911)
G score	0.0160	0.0363	0.0583	0.0855	0.0933
	(0.4617)	(1.0598)	(0.9313)	(1.0939)	(1.0701)
Health score_Dummy A	0.0030	0.0126	0.0050	-0.0105	-0.0128
	(0.1984)	(0.8502)	(0.1837)	(-0.3101)	(-0.3383)
Health score_Dummy B	0.0197	0.0194	0.0436	0.0367	0.0493
	(1.6031)	(1.6054)	(1.9721*)	(1.3281)	(1.6021)
Health score_Dummy C	-0.0228	-0.0244	-0.0406	-0.0372	-0.0517
	(-1.4683)	(-1.5871)	(-1.4485)	(-1.0619)	(-1.3251)
Fair score	-0.0387	-0.0244	-0.0744	-0.0868	-0.0881
	(-1.6494)	(-1.0536)	(-1.7623*)	(-1.6456)	(-1.4977)
Fixed year	Yes	Yes	Yes	Yes	Yes
R²	0.1773	0.1371	0.2070	0.1681	0.1866
F-statistic	1.4681	1.0820	1.7787**	1.3764	1.5629*
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

Table 9 examines the impact of workplace safety incidents on fairness scores. For firms with an A rating, the coefficient for AR1 = -0.0398 (p < 10%) is significantly negative, indicating that firms with higher fairness ratings are at greater risk of experiencing a substantial decline in their scores following a workplace safety incident. To mitigate this risk, such firms should proactively establish crisis management strategies, including transparent disclosure of response plans, to maintain stakeholder trust.

Table 9

The impact of workplace accidents or occupational diseases on Fair scores.
variable	AR 0	AR 1	CAR(-1, 1)	CAR(-1, 2)	CAR(-1, 3)
C	-4.3243	-4.1129	-7.1311	-5.8052	-9.9056
	(-1.8355*)	(-1.7873*)	(-1.6797*)	(-1.1102)	(-1.6930*)
LOG_TA(Million)	0.2587	0.1428	0.4636	0.6080	0.7939
	(1.6597*)	(0.9381)	(1.6504)	(1.7575*)	(2.0510**)
PB	-0.0712	-0.1983	-0.6415	-0.9214	-1.1360
	(-0.3465)	(-0.9880)	(-1.7326*)	(-2.0203**)	(-2.2263**)
Debt	0.0158	0.0219	0.0288	0.0133	0.0377
	(0.7482)	(1.0630)	(0.7561)	(0.2840)	(0.7178)
Current	0.0028	0.0036	0.0035	0.0039	0.0027
	(1.0014)	(1.3154)	(0.6977)	(0.6295)	(0.3811)
TA Turnover	0.5231	0.4547	0.6720	0.3606	0.5408
	(0.8295)	(0.7381)	(0.5913)	(0.2576)	(0.3452)
ROA	-0.0649	-0.0210	-0.0906	-0.0919	-0.0643
	(-1.5664)	(-0.5189)	(-1.2136)	(-1.0001)	(-0.6255)
Cash Flow	-0.1897	-0.2404	0.0445	-0.2348	-0.0955
	(-0.2801)	(-0.3634)	(0.0365)	(-0.1562)	(-0.0567)
R&D(Million)	0.0000	0.0000	0.0000	0.0000	0.0000
	(-0.5193)	(0.2121)	(-0.2193)	(-0.2600)	(-0.6176)
E score	-0.0151	-0.0323	-0.0441	-0.0339	-0.0665
	(-0.4987)	(-1.0934)	(-0.8094)	(-0.5041)	(-0.8851)
S score	0.0357	0.0187	0.0681	0.0627	0.0904
	(1.0701)	(0.5735)	(1.1312)	(0.8457)	(1.0908)
G score	0.0184	0.0430	0.0733	0.1077	0.1234
	(0.5279)	(1.2638)	(1.1673)	(1.3934)	(1.4268)
Health score	-0.0061	-0.0010	-0.0121	-0.0207	-0.0328
	(-0.3773)	(-0.0609)	(-0.4127)	(-0.5743)	(-0.8143)
Fair score_Dummy A	-0.0139	-0.0398	-0.0505	-0.0620	-0.0796
	(-0.5812)	(-1.7093*)	(-1.1748)	(-1.1713)	(-1.3452)
Fair score_Dummy B	0.0059	-0.0102	0.0046	-0.0130	-0.0158
	(0.2623)	(-0.4652)	(0.1132)	(-0.2613)	(-0.2842)
Fair score_Dummy C	-0.0305	0.0133	-0.0364	-0.0390	-0.0287
	(-1.0298)	(0.4589)	(-0.6834)	(-0.5944)	(-0.3906)
Fixed year	Yes	Yes	Yes	Yes	Yes
R²	0.1417	0.1174	0.1713	0.1549	0.1679
F-statistic	1.1246	0.9058	1.4078	1.2487	1.3750
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

In this paper, we employ the difference-in-differences methodology to control for industry-specific factors that may contribute to excess abnormal returns on the event announcement date. This approach allows us to isolate and exclude the influence of industry effects, thereby providing a more accurate assessment of the impact of workplace accidents on stock performance. This approach compares the stock performance of companies that have experienced workplace accidents (the experimental group) with that of similar companies within the same industry that have not (the control group).

The analysis employs dummy variables to assess the period from one day before to five days after the announcement of the accident. Specifically, Dummy Variable 1 captures this time frame (coded as 1 for the experimental group and 0 otherwise), while Dummy Variable 2 identifies the event announcement date (coded as 1 on the announcement day and 0 otherwise). The interaction term between these dummy variables is used to estimate the effect of interest.

The results of the difference-in-differences analysis reveal a statistically significant negative correlation between the announcement of workplace accidents and stock returns. The coefficient of -0.5613 indicates a notable decline in stock prices on the day the accident was announced (Table 10).

These findings underscore the substantial financial impact of workplace safety. The observed negative market reactions suggest that investors perceive workplace accidents as indicative of increased risk, leading to a decrease in stock value. This highlights the critical importance for companies to prioritize workplace safety, both to uphold ethical standards and to safeguard their financial performance.

Table 10

The research results of the difference-in-differences study.
variable	Coefficient	t-Statistic	observations
C	0.1200	(1.3852)	254
Dummy 1	-0.2703	(-2.2058**)	254
Dummy 2	0.1093	(0.4766)	254
Dummy1_ Dummy 2	-0.5613	(-1.7309*)	254
F-statistic	4.5520***
, , and ** significance at the 10%, 5%, and 1% levels, respectively.

This study investigates the financial implications of workplace safety incidents on publicly listed Taiwanese companies, focusing on stock market reactions and ESG-related factors. Our findings reveal a significant negative market response to workplace accidents, as reflected in abnormal returns (AR) and cumulative abnormal returns (CAR). The empirical results confirm that investors penalize firms with inadequate workplace safety measures, leading to immediate stock price declines. Moreover, firms with strong ESG performance demonstrate greater resilience, experiencing smaller market losses, which underscores the role of sustainability practices in mitigating financial risks.

The results indicate that industries with inherently hazardous working conditions, such as building materials, construction, and shipping, exhibit the highest incidence of workplace accidents. These industries require stringent safety regulations and enhanced risk management strategies to safeguard employees. The observed pattern aligns with prior research, which identifies construction and international shipping as among the most dangerous sectors (Shafique & Rafiq, 2019; Hetherington et al., 2006). This underscores the necessity for proactive safety measures and continuous improvements in occupational health protocols.

From a financial perspective, our findings support the hypothesis that workplace accidents trigger investor overreaction, resulting in short-term stock price drops followed by gradual recovery. This behavior aligns with De Bondt and Thaler’s (1985) overreaction theory and is consistent with Boubaker et al. (2015), who observed similar patterns in response to terrorist attacks. Our event study results highlight the role of cognitive biases, emotional influences, and herd behavior in shaping investor reactions to negative news.

Further regression analyses demonstrate that firm size significantly moderates market reactions, with larger firms experiencing less severe stock price declines. This suggests that investors perceive large firms as having better risk management capabilities. Additionally, firms with higher price-to-book (PB) ratios exhibit greater negative market reactions, indicating that firms with strong investor expectations face heightened scrutiny during crises. Return on assets (ROA) is also negatively correlated with stock performance on the event day, suggesting that profitability does not necessarily shield firms from negative investor sentiment following workplace accidents.

A t-test was conducted to examine the impact of workplace accidents on stock market performance before and after ESG adoption. The t-test results indicate no significant difference in abnormal returns (AR) and cumulative abnormal returns (CAR) between ESG-adopting and non-ESG firms. However, ESG-adopting firms experienced smaller negative market reactions, suggesting greater resilience to operational risks. These findings highlight the role of ESG in mitigating financial risks and enhancing investor confidence.

This research demonstrates a correlation between workplace accidents and a company's stock market performance, indicating that accidents negatively impact a company's financial standing. The findings align with the research conducted by Kabir, Watson, and Somaratna (2018), which also observed a link between workplace safety and financial performance. While the statistical significance of this study's results is limited, it reveals a trend: companies actively engaged in Environmental, Social, and Governance (ESG) practices, including workplace safety, tend to experience less severe negative stock market fluctuations following accidents compared to companies that do not prioritize ESG principles. This suggests that companies prioritizing ESG practices, particularly workplace safety, may be better equipped to mitigate the financial consequences of accidents.

The study also explores ESG-related factors, revealing that workplace accidents do not significantly affect environmental or governance scores. However, firms with B-rated social and employee health and safety scores exhibit resilience, suggesting that strong social responsibility initiatives can buffer against reputational damage. Conversely, firms with C-rated fairness scores face significant declines, emphasizing the importance of transparent crisis management strategies in maintaining stakeholder trust.

Employing the difference-in-differences methodology, we further isolate the causal impact of workplace accidents on stock performance. The significant negative coefficient confirms that workplace accidents have a tangible financial impact beyond industry-specific factors. This finding underscores the critical need for firms to prioritize occupational health and safety as part of their corporate governance framework.

Author Contribution

TY : Thesis guidance and revisionYM : Paper ideas, main body of the article, statistics, charts

Data Availability

Taiwan Economic Journal (TEJ) databasehttps://www.tejwin.com/

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No competing interests reported.

The role of ESG in negative news

Status:

Version 1

Abstract

Figures

1. Introduction

2. Literature Review

2.1 The Rise of ESG: A Framework for Sustainable Business Practices

2.2 The Vital Link Between Corporate Social Responsibility and Workplace Safety

2.3 The Complex Relationship Between Corporate Management and Workplace Safety

3. Data and Methods

3.1 Dependent variable

3.2 Independent variable

4. Empirical Results

5. Conclusion

Declarations

Author Contribution

Data Availability

References

Additional Declarations

Status:

Version 1