The Irrelevance of ESG Disclosure to Retail Investors

44 Pages Posted: 12 Jun 2020 Last revised: 11 Oct 2024

See all articles by Austin Moss

Austin Moss

University of Colorado at Boulder

James P. Naughton

University of Virginia, Darden School of Business

Clare Wang

University of Colorado at Boulder - Leeds School of Business

Date Written: May 19, 2020

Abstract

Using an hourly dataset on retail investor individual security positions from Robinhood Markets, we find no evidence that ESG disclosures inform retail investors’ buy and sell decisions. The response on ESG press release days by retail investors is indistinguishable from non-event days. In contrast, these same investors make economically meaningful changes to their portfolios in response to non-ESG press releases, especially those that pertain to earnings announcements. We use stock return tests to show that there is economic content in ESG press releases, and we conduct subsample analyses showing that retail investors do not respond to the most salient and economically transparent ESG disclosures. Collectively, these tests suggest that a lack of economic content, a lack of visibility, and difficulty with investment integration are unlikely to explain our findings.

Keywords: ESG, Retail Investors, Corporate Social Responsibility

JEL Classification: M41, D83, G14, G32, G34

Suggested Citation

Moss, Austin and Naughton, James P. and Wang, Clare, The Irrelevance of ESG Disclosure to Retail Investors (May 19, 2020). Available at SSRN: https://ssrn.com/abstract=3604847 or http://dx.doi.org/10.2139/ssrn.3604847

Austin Moss

University of Colorado at Boulder ( email )

Boulder, CO CO 80309
United States

James P. Naughton

University of Virginia, Darden School of Business ( email )

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

Clare Wang (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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