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Motivated by the increasing momentum of environmental, social and governance (ESG) investing, this research aims to test the impact of ESG-related news on stock returns, comparing different geographical areas to check whether the cultural background makes any difference.

Using a classic event–study methodology, this study measures extra returns following the broadcast of positive or negative ordinary news concerning ESG issues using a panel of major international companies located in Europe, North America and the Asia-Pacific (APAC) region.

ESG news are interpreted differently in different geographical areas. In Europe, bad news matter more than good news and produce a negative price impact. In the USA, a mirror picture emerges: good news matter more than bad news and produce a negative price impact. In the APAC area, ESG news are no news and are not correlated to significant extra returns. This study also shows that ESG reputation plays an important role and affects the impact of news on equity returns.

Both managers and equity investors need to be aware of the potential magnitude and direction of stock market’s reactions to news concerning ESG matters, taking also into consideration the location of the firm and the moderating effect of ESG reputation. Sustainability cannot be ignored anymore and need to be included into information data set and decision-making processes.

This study adds to the current literature insights on how ESG-related news impact in different geographical contexts. This study finds that news of similar tone may produce divergent effect on stock returns according to the prevailing cultural and economic interpretation of sustainability investments.

Utilising a database that distinctly classifies firm-level ESG (environmental, social and governance) news sentiment as positive or negative, the authors examine the information flow between the two types of ESG news sentiment and stock returns for 20 companies listed on the Johannesburg Stock Exchange between 2015 and 2021.

The authors use Shannonian transfer entropy to examine whether information significantly flows from ESG news sentiment to stock returns and a modified event study analysis to establish how stock prices react to changes in the two types of ESG sentiment.

Using Shannonian transfer entropy, the authors find that for the majority of the companies studied, information flows from the positive ESG news sentiment to stock returns while only a minority of the companies exhibit significant information flow from negative ESG news sentiment to returns. Furthermore, the study’s findings show significantly positive (negative) abnormal returns on the event date and beyond for both upgrades and downgrades in positive ESG news sentiment.

This study is among the first in an African context to investigate the impact of ESG news sentiment on stock market returns at high frequencies.

This study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media agenda-setting theory and legitimacy theory, this study hypothesises that an increase in ESG negative media coverage should cause a reputational drawback, leading companies to reduce tax avoidance to regain their legitimacy. Hence, this study examines a novel channel that links ESG and taxation.

This study uses panel regression analysis to examine the relationship between negative media coverage of ESG issues and tax avoidance among the largest European entities. This study considers different measures of tax avoidance and negative media coverage.

The results show that negative media coverage of ESG issues is negatively associated with tax avoidance, suggesting that media can act as an external monitor for corporate taxation.

The findings have implications for policymakers and regulators, which should consider tax transparency when dealing with ESG disclosure requirements. Tax disclosure should be integrated into ESG reporting.

The study has social implications related to the media, which act as watchdogs for firms’ irresponsible practices. According to this study’s findings, increased media pressure has the power to induce a better alignment between declared ESG policies and tax strategies.

This study contributes to the literature on the mechanisms that discourage tax avoidance and the literature on the relationship between ESG and taxation by shedding light on the role of media coverage.

Gender diversity in corporate boards is broadly studied in existing corporate governance literature. However, the role of board gender diversity on environmental, social and governance (ESG) performance of the banks is still unaccounted for. Drawing on resource dependence and legitimacy theory, this study addresses this pressing research issue. Moreover, investigation of ESG controversies as a moderator paves the existing corporate governance research to the new avenues.

Data were sourced from Refinitiv database on 37 US banks from the period of 2013 to 2017. This study employs static and dynamic panel regression models that include random effects, fixed effects and dynamic generalised method of moments (GMMs) to test the hypotheses. Furthermore, system GMM is used to reduce the issue of endogeneity, measurement error, omitted variables bias and bank-specific heterogeneity.

We identify a significant positive relationship between board gender diversity and the ESG performance of US banks. However, the result propounds non-significant moderating effect of ESG controversies on the board gender diversity–ESG performance nexus.

Literature on board gender diversity and ESG separately and predominantly explains firm/bank's financial performance. This study is one of the pioneering attempts to explain the role of board gender diversity on ESG performance. Although incremental, however, this study also contributes to the literature on ESG in the US context.

The purpose of this study is to examine the impact of firm environmental, social and governance (ESG) rating scores on market perception and stock behavior from 2017 to 2021 while controlling for COVID-19 severity score.

The authors used panel regression models with robust standard errors based on cross-country and cross-industry sample of 1,324 ESG firms from 25 emerging countries across four regions. Four separate regression analyses are used. Hausman test is used to determine whether fixed-effect (FE) or random-effect approaches should be used in regression models. Lagrange multiplier test is used to test for time FEs, and F-test for individual effects to choose between pooled ordinary least squares model and FE. Two-unit root tests are conducted to check stationarity. Heteroskedasticity and serial correlation were controlled through a robust covariance matrix estimation.

The authors provide evidence that the stakeholder theory persists in emerging countries. Overall, the results suggest that firms’ stock behavior is positively associated with the level of environmental and social performance in the region. However, the results do not provide empirical evidence to support the link between ESG performance and stock market perception proxied by the price-to-sales ratio. The results suggest that Refinitiv and Bloomberg ESG rating scores have a positive impact on stock performance in emerging markets, albeit the Bloomberg rating score is insignificant.

Favorable impact of environmental and social performance on stock performance suggests that policymakers should take initiatives to raise awareness toward investments in ESG projects. Evidence shows that ESG stock performance in emerging markets does not insulate firms from the COVID-19 severity. Furthermore, this study highlights the inconsistency in calculating the ESG ratings, therefore, a more standardized approach is recommended to support investors seeking sustainable investments.

The findings have social implications for investors with proenvironmental preferences and nonpecuniary motives for ethical investments. Asset fund managers should develop ESG investment strategies to promote investor preferences that are linked to the proenvironmental and prosocial attitudes by increasing their investments in stocks of firms that behave ethically and support the environment. Furthermore, the findings show that investors pay a price for ethical and socially responsible investments as they are evaluating the environmental and social activities, hence, the firm ESG profile influences equity valuation and risk assessment.

The study extends the literature and provides evidence from the unique setting of emerging markets by analyzing the relationship between ESG rating scores and the COVID-19 severity scores on one hand, and stock behavior and market perception on the other.

This study aims to examine the risk-resistant role of environmental, social and governance (ESG) performance in the capital market, focusing on an organizational standpoint. Furthermore, it aims to offer management decision advice to companies seeking protection against stock market risks. Conclusions obtained through this research have the potential to enrich the economic consequences of ESG performance, provide practical implications for enhancing corporate ESG performance, improving corporate information quality and stabilizing capital market development.

Based on the data of Chinese A-share listed companies from 2009 to 2020, this study examines the risk-resistant function of ESG performance in the capital market. The impact of ESG performance on management behavior is analyzed from the perspective of organizational management and the three mechanisms of pre-event, during the event and post-event.

This paper demonstrates that companies that effectively implement ESG practices are capable of effectively mitigating risks associated with stock price crashes. Heterogeneity analysis reveals that the inhibitory effect of ESG performance on stock price crash risk is more pronounced in nonstate-owned enterprises and enterprises with higher levels of marketization. After controlling for issues such as endogeneity, the conclusions of this paper are still valid. The mechanism analysis indicates that ESG performance reduces the risk of stock price crash through three paths of organizational management: pre-event, during the event and post-event. That is, ESG performance plays the role of restraining managers’ opportunistic behavior, reducing information asymmetry and boosting investor sentiment.

This paper provides new insights into the relationship between ESG performance and stock price crash risk from an organizational management perspective. This study establishes three impact mechanisms (governance effect, information effect and insurance effect), offering a theoretical basis for strategic corporate decisions of risk management. Additionally, it comprehensively examines the contextual differences in the role of ESG performance, shedding light on the specific domains where ESG practices are influential. These findings offer valuable insights for promoting stable development in the capital market and fostering the healthy growth of the real economy.

This paper aims to investigate the effect of environmental, social and governance (ESG) controversies on the cost of equity (COE) capital, exploring the moderating role of both positive ESG performance and market securities regulation.

This paper adopts a sample of 2,599 time observations related to European listed companies for which the authors examine a set of 30 negative ESG scores across the three pillars in terms of controversies, compliance and other negative issues. This study uses the average of seven implied COE estimates.

The results show that negative ESG performance, particularly environmental controversies, increases the COE, although this impact is mitigated when associated with company efforts to improve environmental performance. Besides, environmental controversies are likely to increase the COE in countries where the market regulation is stronger, as a consequence of higher investors’ expectations towards the scrutiny role of more efficient markets against companies’ controversies.

Companies should take care seriously of environmental issues such as biodiversity, product impact and resource impact, because investors do react accordingly. As despite no direct effects of positive ESG performance are observed in terms of COE reduction, the mitigating role on the ESG controversies–COE relationship makes ESG practices still significant for European investors.

The effects of ESG performance on company financial performance should be investigated under the assumption that bad events weight more than positive ESG performance.

Because no prior studies have specifically assessed the effect of the European listed companies’ ESG controversies on their COE, this paper delivers insights into the relationship between positive and negative ESG performance and their effects on capital market financing.

This paper aims to examine the effect of conditional conservatism on audit fees and whether the firm’s engagement in sustainable practices moderates the relationship between conditional conservatism and audit fees.

Using a sample of 3,767 firm-year observations from 14 European Union countries over the period of 2006–2019, the authors adopt the ordinary least square estimator to perform a panel data analysis of the effect of conditional conservatism on audit fees, and the moderating role of the environmental, social and governance (ESG) scores on the relationship between conditional conservatism and audit fees.

The authors find that conditional conservatism has a significant negative effect on audit fees, suggesting that auditors charge lower audit fees on more conservative clients. The authors also find that firms engaging in ESG actions, whether combined or individual, pay higher audit fees. More interestingly, the authors provide evidence that the negative effect of conditional conservatism on audit fees is mitigated only when ESG performance is considered in combination. This implies that firms exhibiting less commitment to ESG sustainability practices are prone to paying reduced audit fees when engaged in more conservative reporting. The findings remain robust after conducting a battery of tests.

The findings of this study have practical implications for several parties, including companies, auditors and regulators. This study emphasizes the potential benefit associated with using conservative accounting practices in terms of shaping downward the amount of audit fees. However, it also highlights the importance of considering the additional audit costs associated with higher ESG scores when making decisions about implementing sustainable practices.

Unlike prior studies that investigate the direct impact of sustainable practices on audit fees, the present work contributes to the literature on the benefits and costs of ESG by examining the moderating role of ESG performance in the association between audit fees and conditional conservatism. To the best of the authors’ knowledge, this study is the first to examine this relationship. Theoretically, the research integrates the theories of audit risk and agency to provide a more comprehensive understanding of the drivers of audit fees.

This study investigates the impact of environmental, social and governance (ESG) disclosure on firm financial performance under a mandatory disclosure regime in Hong Kong.

The authors examine the largest 109 firms listed on the Hong Kong Exchange (HKEX) as of the financial year of 2019. The authors use a manually constructed index based on the most current 2019 ESG Reporting Guide launched by HKEX, followed by quantitative statistical methods using a model that follows the valuation framework by Ohlson.

The authors find a significant positive association between total ESG disclosure level and firm financial performance in the main tests. However, when the total ESG scores are partitioned into environmental and social subscores, the results show that only social disclosures are value relevant. Moreover, the results demonstrate that environmental and social subscores are both significant when return on assets (ROA) is used as a dependent variable. Furthermore, the robustness tests show that only qualitative ESG information is value relevant to share prices, while both quantitative and qualitative ESG information are relevant to ROA. In addition, the disclosure quality of annual reports alone is good in explaining the firm financial performance in this study.

This study contributes to existing non-financial reporting literature using hand-collected data as well as examining the firm financial performance of ESG reporting under the mandatory disclosure regime in the Hong Kong context.

This study aims to provide a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack of a recognised body of knowledge on this issue. This study, therefore, collates and reviews relevant studies (67 studies) to provide guidance to investors interested in SRI and identify a research agenda for academics desiring to contribute to this area.

This study conducts a systemic literature review employing recognised key words and searching the Web of Science. HistCite is utilised to ensure important cited studies are not missed from the collection. The review was conducted from two perspectives: (1) sources of sustainability information and (2) how the information is used in SRI.

The review identifies five major sources of sustainability information, including corporate reports, ESG ratings, industry affiliation, news and private communication with firms. These sources of information play different roles in the cross section of SRI strategies (i.e. negative and positive screening, active ownership and integration). This study provides guidance on how to use this information in SRI and provides recommendations for future research on how analysts interact with the information, how different informational characteristics impact implementation, ways to improve data quality, improvements to analysis methods and where data use needs to be extended into new strategies.

This review contributes to the SRI literature by inventorying studies of an important, yet omitted aspect, namely, sustainability information. This work also enriches the literature on corporate sustainability information by investigating how this information can be used for a specific purpose, namely, SRI. Given the increasing interest in SRI, this review will provide much-needed guidance for a range of practitioners, including investors and regulators.