Zusammenfassung
We exploit a modification to Sustainalytics' environmental, social, and governance (ESG) rating methodology, which is subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the rating scale but not new information leads some investors to make incorrect assessments about the meaning of the change in ESG ratings. They buy (sell) stocks they misconceive as ESG upgraded (downgraded) even when the opposite is true. This trading behavior exerts transitory price pressure on affected stocks. Our paper highlights the importance of ESG ratings for investors and consequently for asset prices.
Schlagworte
corporate social responsibility, esg rating agencies, sustainable investments, socially responsible investing, esg, portfolio choice
JEL-Klassifizierung
G11, G12, G23, G59, M14, Q5
Thema
Corporate Governance
Beziehungen
Forschungsdaten
JEL-Klassifizierung
Forschungsbereich
Thema
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