Which Corporate ESG News does the Market React to?

34 Pages Posted: 26 Apr 2021 Last revised: 14 Sep 2021

Date Written: April 22, 2021


Using a dataset that classifies firm-level ESG news as positive and negative, we examine how stock prices react to different types of ESG news. We analyze 111,020 firm–day observations for 3,126 companies and find that prices react only to issues identified as financially material for a given industry by sustainability accounting standards, and the reaction is larger for news that is positive, receive more attention, and that is related to social capital issues. We conclude that investors differentiate in their reactions based on whether the news is likely to affect a company’s fundamentals, and therefore their reactions are motivated by a financial rather than a nonpecuniary motive.

Keywords: ESG, information, news, market reaction

JEL Classification: G14, M41

Suggested Citation

Serafeim, George and Yoon, Aaron, Which Corporate ESG News does the Market React to? (April 22, 2021). Forthcoming, Financial Analysts Journal, Harvard Business School Accounting & Management Unit Working Paper No. 21-115, Available at SSRN: https://ssrn.com/abstract=3832698 or http://dx.doi.org/10.2139/ssrn.3832698

George Serafeim (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=15705

Aaron Yoon

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

2001 Sheridan Road
Evanston, IL 60208
United States

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