Corporate ESG Profiles and Investor Horizons

54 Pages Posted: 9 Oct 2017 Last revised: 24 Dec 2020

See all articles by Laura T. Starks

Laura T. Starks

University of Texas at Austin - Department of Finance

Parth Venkat

Securities and Exchange Commission (SEC)

Qifei Zhu

Nanyang Technological University (NTU) - Nanyang Business School

Date Written: October 9, 2017

Abstract

Theories of Environmental, Social and Governance (ESG) investment assume groupings of investors who differ in their preferences or beliefs about ESG. We examine whether investor horizon serves as a basis for these ESG groupings and find that longer horizon investors tilt their portfolios towards firms with high-ESG profiles. We provide evidence that these results are plausibly causal through difference-in-differences tests of shocks to firms’ ESG reputations. Further, consistent with implications of the importance of investor horizon, long-term investors behave more patiently toward the high-ESG firms in their portfolios, selling relatively less after negative earnings surprises or poor stock returns.

Keywords: Corporate ESG, Investor Horizons, Corporate Short-Termism

JEL Classification: G34, G23, G00

Suggested Citation

Starks, Laura T. and Venkat, Parth and Zhu, Qifei, Corporate ESG Profiles and Investor Horizons (October 9, 2017). Available at SSRN: https://ssrn.com/abstract=3049943 or http://dx.doi.org/10.2139/ssrn.3049943

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

Parth Venkat

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Qifei Zhu (Contact Author)

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Singapore, 639798
Singapore

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