The effects of mandatory ESG disclosure on price discovery efficiency around the world

Qiyu Zhang, Rong Ding, Ding Chen and Xiaoxiang Zhang

International Review of Financial Analysis, 2023, vol. 89, issue C

Abstract: We examine the effect of mandatory environmental, social and governance (ESG) disclosure on firms' price discovery efficiency around the world. Using data from 45 countries between 2000 and 2020 and a difference-in-differences method, we find that mandatory ESG disclosure increases firm-level stock price non-synchronicity and timeliness of price discovery, suggesting more firm-specific information is incorporated into stock prices in a more timely manner. Mandatory ESG disclosure improves price discovery efficiency more in countries with strong demands for ESG information and in firms with poor disclosure incentives. Mandatory ESG disclosure also leads to other real market changes, such as lower stock returns, greater changes in institutional ownership and higher firm valuation.

Keywords: Mandatory ESG disclosure; Price efficiency; Governance (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 G28 G30 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:89:y:2023:i:c:s1057521923003277

DOI: 10.1016/j.irfa.2023.102811

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