Who can better push firms to go "green"? A look at ESG effects on stock returns
Serge Darolles (),
Gaelle Le Fol and
Yuyi He
Additional contact information
Serge Darolles: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Yuyi He: CUHK - The Chinese University of Hong Kong [Hong Kong]
Post-Print from HAL
Abstract:
We examine how the information contained in corporate social performance isincorporated into stock prices. Pastor et al. (2021) propose an equilibrium modelfocusing exclusively on the demand part coming from investors (discount rate story).They show that brown assets should have higher expected returns than green assetsbecause investors have green tastes. In line with theoretical model of Pedersen etal. (2021), Derrien et al. (2022) analyze how the impact of negative ESG news onfirms' future value, focusing exclusively on the expectations of futures sales (cashflows story). To understand the net effect of ESG on stocks returns, we must reconcilethe two stories and analyze the perception of customers and investors' green realinvestment of firms and the effects of their actions and interactions. Neither theory,nor empirical studies give a clear conclusion on the sign of the effect because they onlylook at one channel at a time. We decompose here the effect of "S" scores on expectedreturns via changes in institutional ownership, and show that the negative effect candisappear when allowing for both the cash flows and the discount rate parts in theempirical model. Finally, we show that "E", "S", and "G" qualities are not perceivedthe same by customers and investors changing the overall effect on stocks returns.
Date: 2023-06-05
New Economics Papers: this item is included in nep-ene, nep-env and nep-fmk
Note: View the original document on HAL open archive server: https://hal.science/hal-04462749v1
References: View references in EconPapers View complete reference list from CitEc
Citations:
Published in 39th International Conference of the French Finance Association (AFFI), Jun 2023, Bordeaux, France
Downloads: (external link)
https://hal.science/hal-04462749v1/document (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04462749
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().