IDEAS home Printed from https://ideas.repec.org/a/taf/ufajxx/v77y2021i4p104-127.html
   My bibliography  Save this article

ESG Rating Disagreement and Stock Returns

Author

Listed:
  • Rajna Gibson Brandon
  • Philipp Krueger
  • Peter Steffen Schmidt

Abstract

Using environmental, social, and governance (ESG) ratings from seven different data providers for a sample of firms in the S&P 500 Index between 2010 and 2017, we studied the relationship between ESG rating disagreement and stock returns. We found that stock returns are positively related to ESG rating disagreement, suggesting a risk premium for firms with higher ESG rating disagreement. The relationship is primarily driven by disagreement about the environmental dimension. We discuss the practical implications of our findings for firms’ equity cost of capital as well as for investment managers and asset owners who use ESG investment strategies.

Suggested Citation

  • Rajna Gibson Brandon & Philipp Krueger & Peter Steffen Schmidt, 2021. "ESG Rating Disagreement and Stock Returns," Financial Analysts Journal, Taylor & Francis Journals, vol. 77(4), pages 104-127, October.
    • Handle: RePEc:taf:ufajxx:v:77:y:2021:i:4:p:104-127
    DOI: 10.1080/0015198X.2021.1963186
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/0015198X.2021.1963186
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0015198X.2021.1963186?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Özge Sahin & Karoline Bax & Claudia Czado & Sandra Paterlini, 2022. "Environmental, Social, Governance scores and the Missing pillar—Why does missing information matter?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1782-1798, September.
    2. Lopez, Claude & Contreras, Oscar & Bendix, Joseph, 2020. "Disagreement among ESG rating agencies: shall we be worried?," MPRA Paper 103027, University Library of Munich, Germany.
    3. Erhart, Szilárd, 2022. "Take it with a pinch of salt—ESG rating of stocks and stock indices," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Dumrose, Maurice & Rink, Sebastian & Eckert, Julia, 2022. "Disaggregating confusion? The EU Taxonomy and its relation to ESG rating," Finance Research Letters, Elsevier, vol. 48(C).
    5. Addisu A. Lashitew, 2021. "Corporate uptake of the Sustainable Development Goals: Mere greenwashing or an advent of institutional change?," Journal of International Business Policy, Palgrave Macmillan, vol. 4(1), pages 184-200, March.
    6. Bae, Kee-Hong & El Ghoul, Sadok & Gong, Zhaoran (Jason) & Guedhami, Omrane, 2021. "Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic," Journal of Corporate Finance, Elsevier, vol. 67(C).
    7. Gardenier, Julius & Lac, Visieu & Ashfaq, Muhammad, 2021. "Risk-adjusted return in sustainable finance: A comparative analysis of European positively screened and best-in-class ESG investment portfolios and the Euro Stoxx 50 index using the Sharpe Ratio," IU Discussion Papers - Business & Management 7/2021, IU International University of Applied Sciences.
    8. Gao, Feng & Li, Yubin & Wang, Xinjie & Zhong, Zhaodong (Ken), 2021. "Corporate social responsibility and the term structure of CDS spreads," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ufajxx:v:77:y:2021:i:4:p:104-127. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/ufaj20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.