Rating changes revisited: New evidence on short-term ESG momentum

Thomas Cauthorn, Maurice Dumrose, Julia Eckert, Christian Klein and Bernhard Zwergel

Finance Research Letters, 2023, vol. 54, issue C

Abstract: Environmental, social and governance (ESG) ratings are mainstream in sustainable finance. This paper provides important evidence on the effects of ESG rating changes on companies’ stock performance. We contribute to the ESG rating change literature by replicating the calendar-time portfolio analysis for US stocks from Shanaev and Ghimire (2022), which found economically significant results. We find contradictory results, which are robust to the omnipresent rating heterogeneity problem. More precisely, we find that rating changes do not significantly affect stock performance in the short-term. Four methodological mistakes in the original study explain the differences in the results.

Keywords: Calendar-time portfolio analysis; ESG rating; Portfolio management; Sustainable finance (search for similar items in EconPapers)
JEL-codes: C18 G11 G12 G23 G24 M14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000776

DOI: 10.1016/j.frl.2023.103703

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