Beyond Borders: Asset Price Reaction to ESG Incidents at Home and Abroad 

27 Pages Posted: 15 Oct 2024

See all articles by Tomasz Orpiszewski

Tomasz Orpiszewski

Zurich University of Applied Sciences

Mark Thompson

Austrian Institute of Technology

Date Written: September 13, 2024

Abstract

This study examines the impact of ESG incidents on the stock and corporate bond prices of companies headquartered in the United States and Europe, with a particular focus on incidents occurring in countries outside of their domestic jurisdictions. By analyzing a dataset of ESG events worldwide, we identify several key findings. First, environmental incidents are generally associated with a downward movement in both stocks and corporate bonds. In Europe, governance-related news also triggers a pronounced negative reaction. Second, ESG incidents occurring within the home jurisdiction in the US and Europe often lead to a price increase or a milder drop, highlighting a differential market response based on geographical proximity. Third, we observe that incidents reported in non-English languages or occurring farther from the corporate headquarters tend to elicit stronger negative market reactions, especially when these incidents take place in developed countries within the Asia-Pacific region. Finally, our results indicate that the economic profile of the country where the incident occurs significantly influences market reactions. Incidents in wealthier countries with higher GDP per capita result in a greater price drop across all assets, whereas bond prices exhibit a smaller decline or even increase when incidents occur in developing countries. These findings underscore the nuanced ways in which geographical, linguistic, and economic factors shape market responses to global ESG events.

Keywords: ESG news, corporate bonds, event study, proximity bias

JEL Classification: M14, G12, G14, G30, F30

Suggested Citation

Orpiszewski, Tomasz and Thompson, Mark, Beyond Borders: Asset Price Reaction to ESG Incidents at Home and Abroad  (September 13, 2024). Available at SSRN: https://ssrn.com/abstract=4957248 or http://dx.doi.org/10.2139/ssrn.4957248

Tomasz Orpiszewski (Contact Author)

Zurich University of Applied Sciences ( email )

Gertrudstrasse 8
Winterthur, 8401
Switzerland

Mark Thompson

Austrian Institute of Technology ( email )

Donau-City-Strasse 1
Vienna, 1220
Austria

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