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Stock market reaction to mandatory ESG disclosure

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  • Wang, Jiazhen
  • Hu, Xiaolu
  • Zhong, Angel

Abstract

Employing an event-study approach, we examine stock market reaction to the enactment of the Environmental, Social and Governance (ESG) Disclosure Simplification Act of 2021 by the United States House of Representatives. The Act mandates disclosure of standardized ESG metrics among American public companies. A significantly negative reaction of -1.1% is documented across all firms, which does not recover until the fifth day. Carbon-intensive firms and industries are more vulnerable to the negative market reaction. The negative reaction attenuates among firms with higher ESG scores.

Suggested Citation

  • Wang, Jiazhen & Hu, Xiaolu & Zhong, Angel, 2023. "Stock market reaction to mandatory ESG disclosure," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322005797
    DOI: 10.1016/j.frl.2022.103402
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    Cited by:

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    2. Wang, Hu & Shen, Hong & Li, Shouwei, 2023. "ESG performance and stock price fragility," Finance Research Letters, Elsevier, vol. 56(C).
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    4. Chai, Shanglei & Cao, Mengjun & Li, Qiang & Ji, Qiang & Liu, Zuankuo, 2023. "Exploring the nexus between ESG disclosure and corporate sustainable growth: Moderating role of media attention," Finance Research Letters, Elsevier, vol. 58(PC).
    5. Yang, Dan & Zhao, Zhiyong & Wang, Liangliang, 2024. "Is ESG reporting informative to debtholders?— Evidence from a quasi-experiment in China," Finance Research Letters, Elsevier, vol. 62(PA).

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    More about this item

    Keywords

    Event study; ESG disclosure; Nonfinancial disclosure; Climate-related financial risks; Mandatory disclosure;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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