Every Little Helps? ESG News and Stock Market Reaction

Stories about corporate social responsibility have become very frequent over the past decade, and managers can no longer ignore their impact on firm value. In this paper, we investigate the extent and the determinants of the stock market's reaction following ordinary news related to environment...

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Bibliographic Details
Published in:IDEAS Working Paper Series from RePEc 2019-06, Vol.157 (2), p.543-565
Main Authors: Capelle-Blancard, Gunther, Petit, Aurélien
Format: Article
Language:English
Subjects:
Business and Management
Business Ethics
Companies
Corporate governance
Earthquakes
Economics and Finance
Education
Environmental factors
Environmental governance
Ethics
Governance
Humanities and Social Sciences
Management
Market value
Mass media
Negative events
News
News media
NGOs
Nongovernmental organizations
Oil spills
Original Paper
Philosophy
Quality of Life Research
Regulation of financial institutions
Reputations
Securities markets
Social investing
Social responsibility
Stock exchanges
Stockholders
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Summary:Stories about corporate social responsibility have become very frequent over the past decade, and managers can no longer ignore their impact on firm value. In this paper, we investigate the extent and the determinants of the stock market's reaction following ordinary news related to environmental, social and governance issues—the so-called ESG factors. To that purpose, we use an original database provided by Covalence EthicalQuote. Our empirical analysis is based on about 33,000 ESG news (positive or negative), targeting one hundred listed companies over the period 2002-2010. On average, firms facing negative events experience a drop in their market value of 0.1%, whereas companies gain nothing on average from positive announcements. We find also that market participants are responsive to the media, but they do not react to firms' press releases or to NGOs' disclosures. Moreover, our results indicate that sector's reputation mitigates the loss (the goodwill hypothesis) and that cultural proximity and lexical contents of ESG disclosures play a significant role in the magnitude of the impact.
ISSN:0167-4544
1573-0697
DOI:10.1007/s10551-017-3667-3