Corporate Environmental Performance and Stock Price Synchronicity: Examining Industry Sensitivity and Disclosure Regimes in Stakeholder‐Oriented Markets

Ishwar Khatri, Phuong Bui and Khine Kyaw

Business Strategy and the Environment, 2025, vol. 34, issue 8, 10098-10117

Abstract: This study examines the relationship between corporate environmental performance (CEP) and stock price synchronicity, focusing on the roles of industry environmental sensitivity and nonfinancial disclosure regimes (voluntary vs. mandatory). Using data from 396 Nordic listed firms between 2010 and 2022, the findings show that higher CEP generally increases synchronicity, supporting the noise reduction hypothesis. However, under mandatory reporting, CEP decreases synchronicity, aligning with the idiosyncratic information view. The results are robust across IV‐2SLS, PSM, and Difference‐in‐Differences methods. Additional analysis highlights the firm's information environment as a crucial mechanism, with stronger environments—characterized by higher analyst coverage, institutional ownership, and ESG disclosures—enhancing stock price alignment with the market. Industry‐level analysis also confirms sectoral heterogeneity. This study contributes to the literature on ESG and market efficiency by offering a unique Nordic perspective, a developed market with a strong stakeholder orientation.

Date: 2025
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