Material Sustainability Information and Stock Price Informativeness
Journal of Business Ethics, Forthcoming
65 Pages Posted: 10 May 2017 Last revised: 16 Feb 2021
Date Written: January 17, 2020
As part of the Securities and Exchange Commission’s revision of Regulation S-K, which lays out reporting requirements for publicly listed companies, many investors proposed the mandatory disclosure of sustainability information in the form of environmental, social and governance (ESG) data. However, progress is contingent on collecting evidence regarding which sustainability disclosures are financially material. To inform this issue, we examine materiality standards developed by the Sustainability Accounting Standards Board (SASB). Firms voluntarily disclosing more SASB-identified sustainability information exhibit greater price informativeness, while the disclosure of non-SASB information does not relate to informativeness. The results are robust to a changes analysis and a difference-in-differences analysis that exploits the staggered release of SASB standards across different industries over time. We also document stronger results for firms with higher exposure to sustainability issues, poorer sustainability ratings, greater institutional and socially responsible investment fund ownership, and coverage from analysts with lower portfolio complexity.
Keywords: voluntary disclosure, accounting standards, sustainability, nonfinancial information, corporate social responsibility, stock price informativeness, synchronicity
JEL Classification: G12, G14, G2, M1, M2, M4
Suggested Citation: Suggested Citation