ArticlePublisher preview available

Every Little Helps? ESG News and Stock Market Reaction

Authors:
Gunther Capelle-Blancard at Paris 1 Panthéon-Sorbonne University
Gunther Capelle-Blancard
Aurélien Petit at Université de Lyon
Aurélien Petit
Read publisher preview
Download citation
To read the full-text of this research, you can request a copy directly from the authors.

Abstract and Figures

Stories about corporate social responsibility have become very frequent over the past decade, and managers can no longer ignore their impact on firm value. In this paper, we investigate the extent and the determinants of the stock market’s reaction following ordinary news related to environmental, social and governance issues—the so-called ESG factors. To that purpose, we use an original database provided by Covalence EthicalQuote. Our empirical analysis is based on about 33,000 ESG news (positive or negative), targeting one hundred listed companies over the period 2002–2010. On average, firms facing negative events experience a drop in their market value of 0.1%, whereas companies gain nothing on average from positive announcements. We find also that market participants are responsive to the media, but they do not react to firms’ press releases or to NGOs’ disclosures. Moreover, our results indicate that sector’s reputation mitigates the loss (the goodwill hypothesis) and that cultural proximity and lexical contents of ESG disclosures play a significant role in the magnitude of the impact.
Figures - available from: Journal of Business Ethics
This content is subject to copyright. Terms and conditions apply.
A preview of this full-text is provided by Springer Nature.
Learn more
Content available from Journal of Business Ethics
This content is subject to copyright. Terms and conditions apply.
ORIGINAL PAPER
Every Little Helps? ESG News and Stock Market Reaction
Gunther Capelle-Blancard
1
•Aure
´lien Petit
2
Received: 24 March 2016 / Accepted: 8 August 2017 / Published online: 18 September 2017
ÓSpringer Science+Business Media B.V. 2017
Abstract Stories about corporate social responsibility
have become very frequent over the past decade, and
managers can no longer ignore their impact on firm value.
In this paper, we investigate the extent and the determi-
nants of the stock market’s reaction following ordinary
news related to environmental, social and governance
issues—the so-called ESG factors. To that purpose, we use
an original database provided by Covalence EthicalQuote.
Our empirical analysis is based on about 33,000 ESG news
(positive or negative), targeting one hundred listed com-
panies over the period 2002–2010. On average, firms fac-
ing negative events experience a drop in their market value
of 0.1%, whereas companies gain nothing on average from
positive announcements. We find also that market partici-
pants are responsive to the media, but they do not react to
firms’ press releases or to NGOs’ disclosures. Moreover,
our results indicate that sector’s reputation mitigates the
loss (the goodwill hypothesis) and that cultural proximity
and lexical contents of ESG disclosures play a significant
role in the magnitude of the impact.
Keywords Corporate social responsibility Socially
responsible investing ESG news Disclosure
Event study
Introduction
‘‘Even the largest avalanche is triggered by small
things.’’ Vernor Vinge
1
Companies are used to coping, almost everyday, with one
or several news concerning their social responsibility.
Certainly, the debate on corporate social responsibility
(CSR) and what should be the firm’s objective(s) is not
settled. There are still lively controversies on this question
(Portney 2008; Porter and Kramer 2011), but whatever the
answer, evidence suggests that environmental, social or
corporate governance concerns—the so-called ESG fac-
tors—may impact firm value and managers can no longer
ignore this.
Recent history provides many instances where bad
corporate social responsibility caused huge economic and
financial losses. Consider, for instance, the Deepwater
Horizon oil spill in April 2010: 3 months after the disaster,
BP had lost half its share value, which represents tens of
billions dollars (Smith et al. 2011). Some even reported
that, given the size of the company, the oil spill impacted
the UK economy as a whole. The Fukushima Daiichi
nuclear disaster in March 2011 is a dramatic example too.
Admittedly, the accident is the direct consequence of the
Great East Japan Earthquake, but the extent of the accident
is also related to governance failures by TEPCO, whose
market value has collapsed (Kawashima and Takeda 2012;
Electronic supplementary material The online version of this
article (doi:10.1007/s10551-017-3667-3) contains supplementary
material, which is available to authorized users.
&Gunther Capelle-Blancard
gunther.capelle-blancard@univ-paris1.fr
Aure
´lien Petit
aurelien.petit@univ-lyon3.fr
1
University Paris 1 Pantheon-Sorbonne (Centre d’Economie
de la Sorbonne), Labex ReFi (Financial Regulation Lab) and
Paris School of Business, 106-112 Bd de l’Hopital,
75647 Paris Cedex 13, France
2
IAE Lyon (Centre de Recherche Magellan), University Jean
Moulin Lyon 3, Lyon, France
1
The Coming Technological Singularity, 1993.
123
J Bus Ethics (2019) 157:543–565
DOI 10.1007/s10551-017-3667-3
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... Businesses faced new challenges and pressures related to sustainability disclosures, which had a critical and long-term impact on investors and stakeholders [1]. Oil and gas (O&G) companies risk losing out investment fund opportunities, which could have an effect on their finance, investment and development strategies unless they build sustainability into their strategy [2]. ...
... Each increase in the quantity of shares on the floor of the stock market will lower the price if demand remains constant. Similarly, as long as supply remains steady, if demand decreases (for example, as a consequence of changes in a firm's top management), the share price declines [1]. Expected or unexpected industry news (such as sustainability reports), macroeconomic information releases, and political declarations are all factors that might influence a company's share price [19]. ...
View
Chinese Stock Market Performance and Natural Disasters
Article
  • Feb 2025
  • J Emerg Market Finance
In this article, we investigate the impact of natural disasters on Chinese stock market performance over the period from 2017 to 2023. Using monthly financial data from 2,117 Chinese companies and climate data relating to floods and storms, our results highlight a negative association between stock market returns and natural disasters. We observe that the recurrence of natural disasters reduces the stock market returns of Chinese companies. We also find that, whatever the intensity of the natural disaster (number of deaths and people affected) and the company’s sector of activity, the observed effect is verified. Our results also show that firms’ Environmental, Social, and Governance (ESG) performance influences their exposure to natural disasters. We find that firms with higher ESG scores perform better despite natural disasters than other firms. This article thus provides the first detailed evidence of Chinese firms’ exposure to natural disasters. JEL Codes: G12, G32, Q40
View
View
View
ESG reputation risk and corporate investment and financing maturity mismatch: evidence from ESG news sentiment
Article
  • May 2025
Purpose This study aims to examine the relationship between environment, social and governance (ESG) news sentiment and the maturity mismatch of investment and financing terms among A-share listed companies in China. It explores how media portrayals of corporate ESG performance influence corporate financing and investment behaviors. Design/methodology/approach The research employs a sophisticated analysis using machine learning and natural language processing to evaluate 2,276,364 ESG-related news articles from the Baidu news website. It assesses the sentiment of these reports and correlates these sentiments with corporate data on investment and financing from 2007 to 2021. Findings The findings reveal that positive ESG news sentiment is significantly associated with reduced maturity mismatches in corporate investment and financing. This relationship is particularly strong among state-owned enterprises, mature companies, those in heavily polluting industries and those located in cities with high ESG governance intensity. The study demonstrates that media coverage can influence corporate behavior by enhancing the company’s reputation and easing financing constraints. Originality/value This paper contributes to the literature by providing empirical evidence of the impact of ESG news sentiment on corporate financial practices in an emerging market context. Unlike previous studies that primarily focus on Western contexts or use aggregated third-party ESG ratings, this study directly analyzes news sentiment and its impact on corporate financial decisions, offering a novel insight into the intermediary role of media in financial markets.
View
Covid-19: The Newest Black Swan Crisis and Its Effect toward Banking Stocks
Article
Full-text available
  • Aug 2022
The outbreak of Covid-19 has changed the condition of stock markets around the world, including Indonesia. The bad news regarding this latest pandemic is forming negative sentiment in the market. Banking companies are one of the industries that have been shaken by the virus. The decline in performance and losses that occurred in many companies due to Covid-19 increased the risk of bad bank loans. This study aims to identify the effect of Covid-19 on the reaction of the banking market in Indonesia. Here, the market reaction is measured by changes in stock prices and stock trading volumes before and after the presidential announcement regarding the Covid-19 case. This study uses the efficient market hypothesis and signal theory to explain the reaction. Data analysis was tested using the Wilcoxon Signed Rank Test. The results showed that there was a change in the price of banking shares and trading volume of banking shares after the entry of Covid-19 in Indonesia.
View
View
View
View
Gender Diversity on Boards: A Myth or a Missed Opportunity for Financial Performance?
Article
  • Apr 2025
This study examines the influence of gender composition on corporate financial performance, measured by the Price-to-Earnings (P/E) ratio and Tobin’s Q, considering both male and female directors. Using an econometric panel data analysis, a dual fixed effects model and the Generalized Method of Moments (GMM) were applied to all Spanish listed companies from 2017 to 2022. The findings reveal no statistically significant correlation between gender diversity in the boards of directors (hereinafter, the board) and the financial performance indicators analyzed. However, a significant association was observed between gender diversity in non-board managerial positions and improved firm economic performance. This challenges the traditional focus on female representation in boards by highlighting the broader impact of gender composition across corporate structures. This study underscores the need for a comprehensive theoretical framework that considers both male and female directors to better understand gender diversity dynamics in governance. From a practical perspective, the results emphasize the importance of promoting gender diversity not only at the board level but also across all managerial positions. Policymakers and corporations should implement strategies to foster balanced gender representation throughout management levels to enhance economic performance.
View
UNPACKING SOCIAL RESPONSIBILITY: THE CURVILINEAR RELATIONSHIP BETWEEN SOCIAL AND FINANCIAL PERFORMANCE.
Article
Full-text available
  • Aug 2002
A central debate in many literatures concerns the relationship between financial and social performance. Studies have shown a negative association, a positive association, as well as no relationship at all. We bridge this long-standing divide by measuring the financial-social performance link within mutual funds that practice socially responsible investing (SRI). SRI fund managers have an array of social screening strategies from which to choose. Prior studies have not addressed this rich heterogeneity within SRI funds, instead focusing on SRI versus non-SRI funds. We find that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that these competing viewpoints may, in fact, be complementary. Furthermore, we find that financial performance depends upon the types of screens used. Based on our results, we suggest that literatures addressing the link between financial and social performance move toward in-depth examination of the merits of different social screening strategies, and away from the continuing debate on the financial merits of either being socially responsible or not.
View
The Weighting of CSR Dimensions: One Size Does Not Fit All
Article
Full-text available
  • Jul 2017
Although the concept of corporate social responsibility (CSR) is fundamentally multidimensional, most studies use composite scores to assess corporate social performance (CSP). How relevant are such composite scores? How the CSR dimensions are weighted? Should the weighting scheme be the same across sectors? This article proposes an original weighting scheme of CSR strengths and concerns, at the sector level, which is proportional to media and nongovernmental organizations (NGOs) scrutiny. The authors show that previous CSP assessments underweight environmental and corporate governance concerns. Moreover, findings suggest that firms that are exposed to the closest scrutiny are usually criticized on one single dimension: for instance, banks for bad corporate governance, and basic-resource firms for environmental damage. Composite scores based on equal weights hence misrepresent CSP and the difference in CSR between sectors.
View
Soft Information in Earnings Announcements : News or Noise?
Article
  • Oct 2008
This paper examines whether the “soft” information contained in the text of management’s quarterly earnings press releases is incrementally informative over the company’s reported “hard” earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006 and document that unanticipated net optimism in managers’ language affects announcement period abnormal returns and predicts post earnings announcement drift. We find that it takes longer for the market to understand the implications of soft information than those of hard information. We also find that the market response varies by firm size, turnover, media and analyst coverage, and the extent to which the standard accounting model captures the underlying economics of the firm. We also show that the second moment of soft information, the level of certainty in the text, is an important determinant of contemporaneous idiosyncratic volatility, and it predicts future idiosyncratic volatility.
View
View
Creating Shared Value
Chapter
  • Jan 2019
THE CAPITALIST SYSTEM is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community.
View
View
View
Participation of Firms in Voluntary Environmental Protection Programs: An Analysis of Corporate Social Responsibility and Capital Market Performance
Article
  • Jan 2009
The Environmental Protection Agency (EPA) employs voluntary programs as a policy instrument to encourage firms to go beyond mere compliance with laws and regulations in protecting the environment. Based on event study methodology, this paper tests for abnormal stock market returns from membership in the National Environmental Performance Track (NEPT) program. The analysis shows that there is strong evidence that acceptance of a facility to the NEPT adds significantly to the market capitalization of the accepted firms. Corporate social responsibility can be financially rewarding for firms and voluntary programs of the EPA can be an effective complement to performance-based regulatory instruments.
View
View
View