ESG Incidents and Shareholder Value

76 Pages Posted: 19 Feb 2021 Last revised: 20 Feb 2021

See all articles by Simon Glossner

Simon Glossner

University of Virginia - Darden School of Business

Date Written: February 17, 2021

Abstract

This paper uses novel environmental, social, and governance (ESG) incident news data to study poor ESG practices. I find that firms’ past ESG incident rates predict more incidents, weaker profits, and lower risk-adjusted stock returns. When examining the cause of these abnormal returns, I find analyst forecast errors as well as lower returns around earnings announcements and subsequent incidents. Moreover, incident rates predict stronger abnormal returns in firms with higher short-term ownership, higher valuation uncertainty, and lower investor attention. Overall, these findings suggest that poor ESG practices negatively impact long-term value, which is not fully reflected in stock prices.

Keywords: ESG incidents, Corporate sustainability, Corporate social responsibility, Socially responsible investment, Managerial myopia, Limited investor attention

JEL Classification: G11, G14, M14

Suggested Citation

Glossner, Simon, ESG Incidents and Shareholder Value (February 17, 2021). Available at SSRN: https://ssrn.com/abstract=3004689 or http://dx.doi.org/10.2139/ssrn.3004689

Simon Glossner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,118
Abstract Views
4,972
rank
22,204
PlumX Metrics