Institutional Trading around Firms’ Negative ESG Events

47 Pages Posted: 22 Nov 2019

See all articles by Lai T. Hoang

Lai T. Hoang

The University of Western Australia

Marvin Wee

Australian National University (ANU); Financial Research Network (FIRN)

Joey (Wenling) Yang

The University of Western Australia

Jing Yu

The University of Western Australia - Department of Accounting and Finance

Date Written: November 12, 2019

Abstract

Using institutional trades at transaction-level and firm’s negative ESG news releases, we find that institutional trading prior to the news is informative of the forthcoming news and that institutions are able to earn abnormal profits from those trades. Further analysis shows that institutions’ informativeness is less pronounced for firms with better existing CSR reputation, lower firm-level information asymmetry, and larger shareholder breadth. We also find evidence that some institutions forgo economic profits to trade for social reasons. Our results are robust to matched sample analysis, different forecasting horizons, and alternative measures of firm’s long-term CSR reputation.

Keywords: Negative ESG Events; Institutional Trading; Corporate Social Responsibility (CSR); ESG

JEL Classification: G14; G23; M14

Suggested Citation

Hoang, Lai T. and Wee, Marvin and Yang, Joey (Wenling) and Yu, Jing, Institutional Trading around Firms’ Negative ESG Events (November 12, 2019). Available at SSRN: https://ssrn.com/abstract=3485411 or http://dx.doi.org/10.2139/ssrn.3485411

Lai T. Hoang (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Marvin Wee

Australian National University (ANU) ( email )

The Australian National University
College of Business and Economics
Canberra, 2601
Australia
+61 2 61250416 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Joey (Wenling) Yang

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

Jing Yu

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

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