Investor Integration of Earnings and ESG News
46 Pages Posted: 21 Nov 2022 Last revised: 20 Nov 2024
Date Written: November 1, 2022
Abstract
We examine whether and how investors integrate earnings and ESG news. This research
question is important given the increasing interconnectedness of ESG and financial information as
well as the extraordinary growth in the demand for ESG information by investors and regulators.
During earnings announcement periods, our analyses show that investors’ reaction to ESG news
depends on the direction of earnings news, as investors price salient ESG news when earnings
news is positive but not when earnings news is negative. Outside earnings announcement periods,
our analyses show that the investor response to salient ESG news varies based on the earnings
news from the prior quarter. Collectively, our results indicate that earnings performance plays a
critical role in the investor response to ESG news, a finding that has substantial implications for
the growing literature that evaluates how investors integrate ESG news into their trading decisions.
Keywords: ESG, Earnings Announcements, ESG Disclosure, CSR
JEL Classification: M41, D83, G14, G32
Suggested Citation: Suggested Citation