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In recent years, crashes and bankruptcies among Chinese real estate enterprises have become increasingly frequent, sparking academic reflection on stock price crash risk. Unlike previous studies that emphasize capital market imperfections, this paper examines the impact of the ‘moat’ mechanism on crash risk using panel data from 142 Chinese A-share listed real estate companies from 2012 to 2021. The findings are as follows: (1) ESG performance reduces stock price crash risk. (2) Strong ESG performance functions as a ‘moat’ mechanism by enhancing corporate reputation and attracting long-term investors. (3) It also serves as a defense mechanism by mitigating excessive investor sentiment and lowering risk exposure. (4) Heterogeneity analysis shows that the ‘moat’ effect is stronger among firms with high corporate reputation, high stock turnover, low investor sentiment, and high risk-taking, and is more pronounced among privately owned firms in southern China that have not crossed the ‘three red lines’ and engage in short-term ‘greenwashing’. These conclusions expand the explanatory framework for crash risk and provide new empirical evidence for the ‘moat’ interpretation of ESG performance in China’s real estate sector.
Wang et al. (Tue,) studied this question.