The ESG Home Bias

58 Pages Posted: 11 Oct 2021

See all articles by Moqi Groen-Xu

Moqi Groen-Xu

Queen Mary University of London

Stefan Zeume

University of Illinois at Urbana-Champaign

Date Written: October 7, 2021


In a sample of 7,209 environmental, social, and governance (ESG) incidents involving 63 incident countries and more than 6,000 firms, we show that abnormal event returns are negative (-0.6%) on average but less so when incidents occur abroad rather than at home. This domestic-foreign return gap is less pronounced when incidents are caused by firms (i) with a large shareholder base from the incident country or (ii) headquartered in more environmentally friendly countries. The gap is accentuated when culprits are headquartered in more patriotic countries. Taken together, our results suggest that shareholder preferences for ESG externalities are not universal but characterized by home bias.

Keywords: environmental and social investing, home bias, proximity bias, law and finance, investor disagreement

JEL Classification: F23, F64, G14,M14

Suggested Citation

Groen-Xu, Moqi and Zeume, Stefan, The ESG Home Bias (October 7, 2021). Available at SSRN: or

Moqi Groen-Xu (Contact Author)

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

Stefan Zeume

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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