Stock Price Reactions to ESG News: The Role of ESG Ratings and Disagreement

Forthcoming, Review of Accounting Studies

44 Pages Posted: 13 Jan 2021 Last revised: 30 Aug 2021

Date Written: January 13, 2021


We investigate whether ESG ratings predict future ESG news and the associated market reactions. We find that the consensus rating predicts future news, but its predictive ability diminishes for firms with large disagreement between raters. Relation between news and market reaction is moderated by the consensus rating. In the presence of high disagreement between raters, the relation between news and market reactions weakens while the rating with most predictive power predicts future stock returns. Overall, while rating disagreement hinders the incorporation of value relevant ESG news into prices, ratings predict future news and proxy for market expectations of future news.

Keywords: ESG; ESG (environmental, social, governance) performance; ESG (environmental/social/governance) performance; ESG disclosure; ESG ratings; ESG reporting; ESG disclosure metrics; sustainability; Investments; news; disagreement; rating disagreement; ratings

JEL Classification: G12, G14, M4

Suggested Citation

Serafeim, George and Yoon, Aaron, Stock Price Reactions to ESG News: The Role of ESG Ratings and Disagreement (January 13, 2021). Forthcoming, Review of Accounting Studies, Available at SSRN: or

George Serafeim (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States


Aaron Yoon

Northwestern University - Department of Accounting Information & Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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