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The Influence of ESG Ratings On Idiosyncratic Stock Risk : The Unrated, the Good, the Bad, and the Sinners
Horn, Matthias (2023): The Influence of ESG Ratings On Idiosyncratic Stock Risk : The Unrated, the Good, the Bad, and the Sinners, in: Schmalenbach Journal of Business Research, Wiesbaden: Springer, Jg. 75, Nr. 3, Special Issue on Transformation, S. 415–442, doi: 10.1007/s41471-023-00155-1.
Faculty/Chair:
Author:
Title of the Journal:
Schmalenbach Journal of Business Research
ISSN:
2366-6153
Publisher Information:
Year of publication:
2023
Volume:
75
Issue:
3, Special Issue on Transformation
Pages:
Language:
English
Abstract:
This study analyzes whether stocks of companies with environmental social governance (ESG) rating show lower idiosyncratic risk. The main analysis covers 898,757 company-month observations of US stocks in the period from 1991 to 2018 and controls for stocks’ exposure to liquidity, mispricing, innovations in volatility risk, investor sentiment, and analysts’ forecast divergence. The main finding is that the receipt of an ESG rating decreases idiosyncratic stock risk. The effect is stronger for stocks that receive a higher ESG rating. Nevertheless, even when companies receive a lower ESG rating, they show significantly lower idiosyncratic risk than stocks without an ESG rating. Furthermore, stocks subject to a negative screen show lower idiosyncratic risk during recessions than comparable stocks with an ESG rating but without a negative screen. The results support the notion that the receipt of an ESG rating decreases uncertainty regarding future stock risk and return and show that ESG ratings and negative screens individually influence stock risk and, therefore, should be considered separately.
GND Keywords: ; ;
Environmental, Social and Governance
Aktienbewertung
Anlageverhalten
Keywords: ; ; ; ; ;
ESG Rating
Idiosyncratic Risk
ESG Investments
Sin Stocks
CSR
Sustainable Investments
DDC Classification:
RVK Classification:
Peer Reviewed:
Yes:
International Distribution:
Yes:
Open Access Journal:
Yes:
Type:
Article
Activation date:
December 20, 2023
Versioning
Question on publication
Permalink
https://fis.uni-bamberg.de/handle/uniba/92519