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Can market discipline affect corporate environmental and social (E&S) policies? Using novel international data on negative news coverage of corporate E&S risks, we show that E&S-conscious investors divest firms with heightened E&S risk.
As a consequence of investors’ reactions, firms with more E&S-motivated investors experience temporary declines in valuations and subsequently improve their E&S policies. Sales in E&S-conscious countries also decrease following negative realizations of E&S risk, but firms do not appear to consistently improve their E&S policies to recover market share. Our results indicate that investors’ divestitures can trigger changes in corporate policies and reduce negative E&S incidents.
We construct measures of firms' beliefs about climate regulation, plans for future abatement, and current emissions mitigation from responses to the...
Recent research shows that a high wage gap between managers and workers identifies better-performing firms, but the stock market does not seem to price...