ESG Controversies, ESG Disclosure and Analyst Forecast Accuracy

Frank Schiemann and Raphael Tietmeyer

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: We investigate whether an environmental social governance (ESG) disclosure moderates the relation between ESG controversies and analyst forecast accuracy. The previous literature has shown that ESG controversies increase uncertainty about a firm's future prospects, while ESG disclosure decreases this uncertainty. We therefore take the next step and integrate ESG controversies, ESG disclosure and uncertainty into one model. Our study is based on 8,369 firm-year observations across 51 countries from 2008 to 2017, containing data from RepRisk, Bloomberg and the Institutional Brokers' Estimate System. We find that analyst forecast errors are generally higher for firms with higher exposure to ESG controversies. More importantly, we establish ESG disclosure as a moderator that mitigates the strength of the relation between ESG controversies and analyst forecast errors. Additionally, we identify that the most important pillar for the relation derives from social controversies and disclosure.

Keywords: ESG controversies; ESG disclosure; Forecast accuracy; Information asymmetry (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003234

DOI: 10.1016/j.irfa.2022.102373

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