How Do ESG Incidents Affect Firm Value?

Francois Derrien (), Philipp Krueger, Augustin Landier and Tianhao Yao
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Tianhao Yao: HEC Paris

No 21-84, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We investigate how sell-side analysts adjust their earnings forecasts following ESG incidents. We find that following negative ESG news, analysts significantly downgrade their earnings forecasts at all horizons, including long-term. Forecast revisions account for all the negative impact of ESG incidents on firm values, implying no change in the discount rate. The negative revision of earnings forecasts reflects lower expectations on future sales (rather than higher future costs). In Europe, analysts who exhibit a stronger sensitivity to ESG news provide significantly more precise forecasts than their peers.

Keywords: ESG; Sustainability; Expectations; Analyst forecasts; Valuation; Discount rate; Cost of capital; Cash flows (search for similar items in EconPapers)
JEL-codes: G32 M14 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2021-08
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2184

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