Investor reaction to the mandatory reporting of corporate ESG practices in the Indian stock market: an event study approach (2020-2021)

According to the SEBI, Indian companies must report their ESG performance through the business responsibility and sustainability report (BRSR) along with annual financial disclosures. BRSR framework is based on the principles of environmental performance, corporate social responsibility, and transparent governance. The current research examines the investor reaction to the announcement of the compulsory filing of BRSR to disclose ESG practices in the Indian context. The present study is based on the top 1,000 market value firms and their daily stock return data from 1st April 2020 to 12th May 2021. Based on the analysis of daily average abnormal returns as well as cumulative average abnormal returns for different event windows, the study finds that stock market participants have responded positively and significantly to the BRSR announcement. Further, the role of carbon sensitivity has been assessed by performing separate industry-wise analyses and the findings indicate that firms operating in carbon-sensitive (non-sensitive) industries have low (high) positive reactions from equity investors. Present research delivers a significant contribution to the growing domain of sustainability research and portrays critical implications for academicians, managers, and policymakers.