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Does ESG negative screening work?

Author

Listed:
  • Robert Eccles

    (Said Business School at Oxford University)

  • Shiva Rajgopal

    (Columbia Business School, Columbia University)

  • Jing Xie

    (Department of Finance and Business Economics, Faculty of Business Administration, University of Macau)

Abstract

We revisit the firm value and pricing implications of the negative screening of sin stocks. Unlike prior work, we find that institutional ownership and valuations related to sin stocks are not different from those of other stocks after controlling for differences in fundamentals between sin and nonsin stocks. Sin stocks do not differ in the likelihood of exiting the public market, the cost of raising new equity, and the announcement returns around negative ESG news relative to non-sin stocks, casting further doubt on whether negative screening hurts sin stocks. However, the cost of new debt is higher for sin stocks.

Suggested Citation

  • Robert Eccles & Shiva Rajgopal & Jing Xie, 2024. "Does ESG negative screening work?," Working Papers 202404, University of Macau, Faculty of Business Administration.
  • Handle: RePEc:boa:wpaper:202404
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    File URL: https://fba.um.edu.mo/wp-content/uploads/RePEc/doc/202404.pdf
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    More about this item

    Keywords

    ESG; exclusion; negative screening; socially responsible investing; firm valuation; performance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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