Market reactions to Environmental, Social, and Governance (ESG)-news: evidence from European markets

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.author Länsilahti, Sini
dc.date.accessioned 2012-02-29T02:30:35Z
dc.date.available 2012-02-29T02:30:35Z
dc.date.issued 2012
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/3021
dc.description.abstract PURPOSE OF THE STUDY The purpose of this thesis is to study and evaluate the public attitude and reactions to reportage of environmental, social, and corporate governance (ESG) related corporate misbehavior as they externalize in changes in the investors? investing behavior. More specifically, the stock market reactions to negative ESG-news are measured and analyzed in order to answer how negative ESG-news affect companies? stock returns in the short- and long-run, and whether the market reaction has changed over time. DATA The empirical study is based on a dataset of 123 negative ESG-news concerning companies that are publicly listed in Europe. The news articles were published between 1st of January 1998 and 31st of December 2007 mainly in The Financial Times. The topics of the news were related to irresponsible behavior of companies in regard to people, environment, or laws and regulations. The market reaction to the news was measured as abnormal stock returns, and thus time series of firm specific daily returns were used on this study. RESULTS The main findings of this research show a significantly negative market reaction in stock returns in the short-term (±5 days) and a significantly positive in the long-term (12, 24, and 36 months). Thus, the empirical results indicate that investors overreact to the news. The results also suggest that the short-term negative reaction has intensified over the years and the long-term buy-and-hold abnormal returns have decreased. On average, the initial market reaction was -2.3% and took place four days before the news was published in a newspaper. The 11-day cumulative abnormal returns were -3.1% for the total sample. Significant buy-and-hold abnormal returns were observed during the three post-event years (36 month BHAR +25%), however, significant and positive abnormal returns were not persistently present in each month. The news category of environmental, social or corporate governance influenced significantly the extent and direction of the market reaction. en
dc.format.extent 94
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Market reactions to Environmental, Social, and Governance (ESG)-news: evidence from European markets en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Economics en
dc.contributor.department Department of Finance en
dc.contributor.department Rahoituksen laitos fi
dc.subject.keyword ESG-news
dc.subject.keyword stock market reaction
dc.subject.keyword corporate social responsibility (CSR)
dc.subject.keyword cumulative abnormal returns (CAR)
dc.subject.keyword buy-and-hold abnormal returns (BHAR)
dc.subject.keyword mean monthly abnormal returns (MMAR)
dc.identifier.urn URN:NBN:fi:aalto-201203011255
dc.type.dcmitype text en
dc.programme.major Finance en
dc.programme.major Rahoitus fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon osakemarkkinat
dc.subject.helecon stock markets
dc.subject.helecon informaatio
dc.subject.helecon information
dc.ethesisid 12744
dc.date.dateaccepted 2012-02-07
dc.location P1 I


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