Impact of ESG Ratings on Securities Market Volatility: A Study on the Investment Mechanism Driven by Social Media

Abstract

In recent years, with the increasing global focus on sustainable development, ESG ratings have become an important factor influencing investment decisions and market stability, and the rise of social media has further reshaped the patterns of information dissemination and investor behavior. This study takes ESG ratings, social media and fluctuations in the securities market as the core and systematically explores the dynamic relationship and mechanism among the three. Research has found that ESG ratings curb market fluctuations by reducing information asymmetry and attracting long-term investors, but differences in the standards of rating agencies may lead to divergence in market perception and exacerbate short-term volatility. Social media significantly moderates the impact of ESG information through emotional dissemination. The spread of negative ESG events through social platforms can trigger irrational selling and amplify stock price fluctuations. The proactive disclosure of ESG improvement measures by enterprises can guide optimism and cushion negative impacts. Furthermore, the differences in the user structure of social media (such as platforms dominated by professional investors and retail investors) further lead to the differentiation of market responses. The research emphasizes that the interaction between ESG ratings and social media reveals the complex driving mechanism of market fluctuations. Rational information dissemination helps stabilize the market, while emotional internal factors tend to trigger short-term volatility.