Abstract
We examine the effect of mandatory environmental, social and governance (ESG) disclosure on firms' price discovery efficiency around the world. Using data from 45 countries between 2000 and 2020 and a difference-in-differences method, we find that mandatory ESG disclosure increases firm-level stock price non-synchronicity and timeliness of price discovery, suggesting more firm-specific information is incorporated into stock prices in a more timely manner. Mandatory ESG disclosure improves price discovery efficiency more in countries with strong demands for ESG information and in firms with poor disclosure incentives. Mandatory ESG disclosure also leads to other real market changes, such as lower stock returns, greater changes in institutional ownership and higher firm valuation.
Original language | English |
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Article number | 102811 |
Number of pages | 17 |
Journal | International Review of Financial Analysis |
Volume | 89 |
Early online date | 17 Jul 2023 |
DOIs | |
Publication status | Published - Oct 2023 |
Bibliographical note
Publisher Copyright:© 2023 The Authors
Keywords
- Governance
- Mandatory ESG disclosure
- Price efficiency
ASJC Scopus subject areas
- Finance
- Economics and Econometrics