The Price of Environmental, Social and Governance Practices Disclosure: An Experiment with Professional Private Equity Investors

Posted: 14 Dec 2014

See all articles by Patricia Crifo

Patricia Crifo

Ecole Polytechnique, Paris - Laboratoire d'Econometrie; Université Paris X Nanterre - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Vanina D. Forget

Ecole Polytechnique ParisTech - Department of Economics

Sabrina Teyssier

University of Angers - Institute of Economic Theory and Analysis (GATE)

Date Written: November 28, 2014

Abstract

This paper sheds light on the impact environmental, social and governance (ESG) corporate practices disclosure have on equity financing. We present a unique framed field experiment in which professional private equity investors competed in closed auctions to acquire fictive firms. We hence observe that corporate non-financial (ESG) performance disclosure impacts firm valuation and investment decision and we quantify to which extent. Main result is an asymmetric effect, investors reacting more to bad ESG practices disclosure than to good ESG ones. Our findings are discussed in terms of practical implications for both investors and firm managers.

Keywords: Corporate Finance; Corporate Social Responsibility; Field experiment; Firm Valuation; Private Equity

JEL Classification: G32, M14, C93, D44

Suggested Citation

Crifo, Patricia and Forget, Vanina D. and Teyssier, Sabrina, The Price of Environmental, Social and Governance Practices Disclosure: An Experiment with Professional Private Equity Investors (November 28, 2014). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2537713

Patricia Crifo (Contact Author)

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

Route de Saclay
Palaiseau, 91128
France

Université Paris X Nanterre - Department of Economics

Nanterre Cedex, 92001
France

Center for Interuniversity Research and Analysis on Organization (CIRANO)

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Vanina D. Forget

Ecole Polytechnique ParisTech - Department of Economics ( email )

Palaiseau Cedex, F-91128
France

Sabrina Teyssier

University of Angers - Institute of Economic Theory and Analysis (GATE) ( email )

93, chemin des Mouilles
Monnaie et Finance at Lyon
69130 Ecully cedex
France

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