Does ESG matter to investors? ESG scores and the stock price response to new information

Brian J. Leite and Vahap B. Uysal

Global Finance Journal, 2023, vol. 57, issue C

Abstract: We examine how a third-party assessment of a firm's relative ESG attractiveness affects investor demand for the firm's equity in the presence of new information. Utilizing an event-study methodology, with credit-rating change events as proxies for new positive and negative information, we find evidence supporting a high ESG score as a significant factor in determining how investors respond to new positive information. Specifically, after controlling for relevant fixed effects, we find that the highest quartile of ESG scores amplifies the positive stock-price reaction to credit-rating upgrades by 130 basis points, providing evidence of confirmation bias.

Keywords: Behavioral finance; Corporate social responsibility; Credit ratings; ESG; Equity pricing; Event studies (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000467

DOI: 10.1016/j.gfj.2023.100851

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