ESG Ratings and Share Repurchases: Examining the Tension between Stakeholder and Shareholder Priorities

Abstract

We find that companies with high ESG ratings are less likely to announce share repurchase programs. This effect is most significant for the E component consistent with the view that firms that buy back shares signal that they care more about shareholders than the environment.. We find that there is no clear significant consistent relation between ESG and equity issues, dividend increases, or mergers and acquisitions. However, high ESG companies will announce buybacks when they are heavily undervalued, suggesting that these firms are less concerned about “doing good” when the financial returns of “doing bad” are large.

Keywords: Buyback, ESG