The impact of ESG rating disagreement on corporate value
– The authors examine the effect of split environmental, social and governance (ESG) ratings on information asymmetry, corporate value and trading behavior. The authors test the risk-based hypothesis and the optimism-bias hypothesis on the relationship between diverging opinions and future stock pr...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Publishing
2023-08-01
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| Series: | Seonmul yeongu |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/JDQS-01-2023-0001/full/pdf |
| _version_ | 1797737155766779904 |
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| author | Ryumi Kim Bonha Koo |
| author_facet | Ryumi Kim Bonha Koo |
| author_sort | Ryumi Kim |
| collection | DOAJ |
| description | – The authors examine the effect of split environmental, social and governance (ESG) ratings on information asymmetry, corporate value and trading behavior. The authors test the risk-based hypothesis and the optimism-bias hypothesis on the relationship between diverging opinions and future stock prices. The authors results show that split ESG ratings is positively related to idiosyncratic volatility, an alternative measure for information asymmetry. Further, the negative effect of split ESG ratings on cumulative abnormal return under short-selling constraints is consistent with the optimism bias hypothesis. The authors find a negative relationship between split ESG ratings and the net purchase ratio (NPR) of pension funds. Considering that the NPR is a direct measure of net demand, ESG disagreement may hinder socially responsible investing (SRI) in a firm. This study directly demonstrates the negative effect of ESG disagreement on firm value and investment by Korea's National Pension Service (NPS). The results offer valuable insights into policymakers, as the wide divergence in ESG ratings requires urgent attention to expand SRI. |
| first_indexed | 2024-03-12T13:24:20Z |
| format | Article |
| id | doaj.art-77f4f7917de2468c8901d9ac292d45a2 |
| institution | Directory Open Access Journal |
| issn | 1229-988X 2713-6647 |
| language | English |
| last_indexed | 2024-03-12T13:24:20Z |
| publishDate | 2023-08-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | Seonmul yeongu |
| spelling | doaj.art-77f4f7917de2468c8901d9ac292d45a22023-08-25T10:53:02ZengEmerald PublishingSeonmul yeongu1229-988X2713-66472023-08-0131321924110.1108/JDQS-01-2023-0001The impact of ESG rating disagreement on corporate valueRyumi Kim0Bonha Koo1School of Business, Chungbuk National University, Cheongju, South KoreaSchool of Business, Chungnam National University, Daejeon, South Korea – The authors examine the effect of split environmental, social and governance (ESG) ratings on information asymmetry, corporate value and trading behavior. The authors test the risk-based hypothesis and the optimism-bias hypothesis on the relationship between diverging opinions and future stock prices. The authors results show that split ESG ratings is positively related to idiosyncratic volatility, an alternative measure for information asymmetry. Further, the negative effect of split ESG ratings on cumulative abnormal return under short-selling constraints is consistent with the optimism bias hypothesis. The authors find a negative relationship between split ESG ratings and the net purchase ratio (NPR) of pension funds. Considering that the NPR is a direct measure of net demand, ESG disagreement may hinder socially responsible investing (SRI) in a firm. This study directly demonstrates the negative effect of ESG disagreement on firm value and investment by Korea's National Pension Service (NPS). The results offer valuable insights into policymakers, as the wide divergence in ESG ratings requires urgent attention to expand SRI.https://www.emerald.com/insight/content/doi/10.1108/JDQS-01-2023-0001/full/pdfSplit ESG ratingSocially responsible investmentInformation asymmetry |
| spellingShingle | Ryumi Kim Bonha Koo The impact of ESG rating disagreement on corporate value Seonmul yeongu Split ESG rating Socially responsible investment Information asymmetry |
| title | The impact of ESG rating disagreement on corporate value |
| title_full | The impact of ESG rating disagreement on corporate value |
| title_fullStr | The impact of ESG rating disagreement on corporate value |
| title_full_unstemmed | The impact of ESG rating disagreement on corporate value |
| title_short | The impact of ESG rating disagreement on corporate value |
| title_sort | impact of esg rating disagreement on corporate value |
| topic | Split ESG rating Socially responsible investment Information asymmetry |
| url | https://www.emerald.com/insight/content/doi/10.1108/JDQS-01-2023-0001/full/pdf |
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