Does Socially Responsible Investing Change Firm Behavior?

Macciocchi, Daniele; Heath, Davidson; Michaely, Roni; Ringgenberg, Matt

doi:10.2139/ssrn.3837706

Cited by 11 publications

(3 citation statements)

References 48 publications

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“…Prior studies (Starks et al 2020;Cao et al 2021) show that sustainable funds are more patient-i.e., they take a longer-term perspective-and respond less to short-term earnings information. 7 However, if sustainable funds invest in firms with higher ESG ratings (Curtis et al 2021;Heath et al 2021), our findings above suggest that these investees are likely to pollute more to achieve short-term earnings benchmarks. We find that this is indeed the case: firms with higher levels of sustainable institutional ownership tend to pollute more when meeting earnings benchmarks.…”

Section: Introductionmentioning

confidence: 83%

“…On the other hand, institutions that are focused on E-S likely screen and select stocks based on E ratings and environmental track records (Amel-Zadeh and Serafeim 2018; Curtis et al 2021;Heath et al 2021). And we find that firms with high E ratings and strong environmental track records are more likely to pollute more to boost earnings when meeting earnings benchmarks.…”

Section: The Moderating Effect Of Environmental Sustainabilitymentioning

confidence: 99%

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Meet, beat, and pollute

et al. 2022

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We investigate two related questions about the trade-off between the short-term pressures on managers to meet earnings targets and the long-term environmental benefits of reduced pollution. Do firms release more toxins by cutting back on pollution abatement costs to boost earnings in years they meet earnings benchmarks? If so, is that relation weaker for firms with higher environmental ratings? Using Environmental Protection Agency (EPA) data on toxic emissions, we find that U.S. firms pollute more when they meet or just beat consensus earnings per share (EPS) forecasts, suggesting that meeting expectations is a more important goal than reducing pollution. We find this relation is stronger, not weaker, for firms with higher environmental ratings: they increase pollution even more when meeting earnings benchmarks than firms with lower ratings. This suggests that highly rated firms build regulatory and reputational slack over time and use it when needed to soften the negative impact of increased pollution. We contribute to the real earnings management and environmental economics literatures by documenting a negative externality of financial reporting incentives on the environment and society. We also contribute to the corporate sustainability literature by showing that an environmental, social, and governance (ESG) focus does not curb managerial short-termism.

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Section: Introductionmentioning

confidence: 83%

Section: The Moderating Effect Of Environmental Sustainabilitymentioning

confidence: 99%

Meet, beat, and pollute

et al. 2022

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“…Recent social movements have generated a renewed emphasis on promoting diverse and inclusive workplaces. For example, institutional investors have increased their investments in firms that demonstrate a commitment to diversity (Heath et al [2021], Taylor [2021]). Regulators also increasingly require firms to describe the extent to which their culture is diverse and inclusive (Vaseghi, Marcogliese, and Bieber [2020]).…”

Section: Introductionmentioning

confidence: 99%

Do Jobseekers Value Diversity Information? Evidence from a Field Experiment and Human Capital Disclosures

Choi¹,

Pacelli²,

Rennekamp

et al. 2023

J of Accounting Research

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We examine how information about the diversity of a potential employer's workforce affects individuals’ job‐seeking behavior. We embed a field experiment in job recommendation emails from a leading career advice agency in the United States. The experimental treatment involves highlighting a diversity metric to jobseekers. Our results indicate that disclosing diversity scores in job postings leads jobseekers to click on firms with higher diversity scores, with such effects varying across jobseeker demographics. A follow‐up survey provides evidence on potential explanations for why jobseekers value diversity information. We then examine how jobseekers’ preferences for diversity relate to disclosure choices under the U.S. SEC Human Capital Disclosure requirement. We find that firms in industries characterized by higher jobseeker responsiveness to diversity information tend to voluntarily disclose diversity metrics in their 10‐Ks under these new disclosure requirements.

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Environmental, social, and governance (ESG) and artificial intelligence in finance: State-of-the-art and research takeaways

Lim

2024

Artif Intell Rev

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The rapidly growing research landscape in finance, encompassing environmental, social, and governance (ESG) topics and associated Artificial Intelligence (AI) applications, presents challenges for both new researchers and seasoned practitioners. This study aims to systematically map the research area, identify knowledge gaps, and examine potential research areas for researchers and practitioners. The investigation focuses on three primary research questions: the main research themes concerning ESG and AI in finance, the evolution of research intensity and interest in these areas, and the application and evolution of AI techniques specifically in research studies within the ESG and AI in finance domain. Eight archetypical research domains were identified: (i) Trading and Investment, (ii) ESG Disclosure, Measurement and Governance, (iii) Firm Governance, (iv) Financial Markets and Instruments, (v) Risk Management, (vi) Forecasting and Valuation, (vii) Data, and (viii) Responsible Use of AI. Distinctive AI techniques were found to be employed across these archetypes. The study contributes to consolidating knowledge on the intersection of ESG, AI, and finance, offering an ontological inquiry and key takeaways for practitioners and researchers. Important insights include the popularity and crowding of the Trading and Investment domain, the growth potential of the Data archetype, and the high potential of Responsible Use of AI, despite its low publication count. By understanding the nuances of different research archetypes, researchers and practitioners can better navigate this complex landscape and contribute to a more sustainable and responsible financial sector.

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Does Socially Responsible Investing Change Firm Behavior?

Cited by 11 publications

References 48 publications

Meet, beat, and pollute

Meet, beat, and pollute

Do Jobseekers Value Diversity Information? Evidence from a Field Experiment and Human Capital Disclosures

Environmental, social, and governance (ESG) and artificial intelligence in finance: State-of-the-art and research takeaways

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