 ESG disclosure and investor welfare under asymmetric information and imperfect competitionYucheng Ji, Weijun Xu, Qi Zhao and Zecheng Jia Pacific-Basin Finance Journal, 2023, vol. 78, issue C Abstract: We study the welfare effect of ESG disclosure in a market with information asymmetry and imperfect competition. We develop a rational expectations equilibrium in which small and large investors have heterogeneous valuations of a risky asset. More precise ESG disclosure would result in small investors providing less liquidity and, in turn, less aggressive trading by larger investors. This interaction between different classes of investors triggered by ESG disclosures leads to some novel results in this paper. First, improving the precision of ESG disclosures makes small investors worse off. Second, the welfare of the large investors is hump-shaped in ESG disclosure precision. Third, although the disclosure policy that maximizes liquidity also maximizes the welfare of small investors, it is not efficient because it may harm the welfare of large investors. Keywords: ESG disclosure; Heterogeneous valuations; Liquidity; Welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:78:y:2023:i:c:s0927538x23000483 DOI: 10.1016/j.pacfin.2023.101982 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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