Reportgreen2020

ESG Preference, Institutional Trading, and Stock Return Patterns

Jie Cao · Sheridan D. Titman · Xintong Zhan · Weiming Elaine Zhang

87 citations0/0 files storedNational Bureau of Economic Research

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Financial Markets and Investment Strategies Corporate Social Responsibility Reporting Sustainable Finance and Green Bonds

Abstract

Socially responsible (SR) institutions tend to focus more on the ESG performance and less on quantitative signals of value.Consistent with this difference in focus, we find that SR institutions react less to quantitative mispricing signals.Our evidence suggests that the increased focus on ESG may have influenced stock return patterns.Specifically, abnormal returns associated with these mispricing signals are greater for stocks held more by SR institutions.The link between SR ownership and the efficacy of mispricing signals only emerges in recent years with the rise of ESG investing, and is significant only when there are arbitrage-related funding constraints.

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1993Common risk factors in the returns on stocks and bonds 1997On Persistence in Mutual Fund Performance 2011Does the stock market fully value intangibles? Employee satisfaction and equity prices 2019Responsible Investing: The ESG-Efficient Frontier 2015Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach 2014Corporate goodness and shareholder wealth 2013Corporate social responsibility and stakeholder value maximization: Evidence from mergers 2017Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

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