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The impact of ESG disclosures and institutional ownership on market information asymmetry

Author

Listed:
  • Renard Y. J. Siew
  • Maria C. A. Balatbat
  • David G. Carmichael

Abstract

This paper investigates the impact of ESG disclosures and institutional ownership on market information asymmetry for 683 firms listed on the New York Stock Exchange for years 2007–2011. Overall, the results suggest that there is a statistically significant negative relationship between ESG disclosures and bid-ask spread and that the presence of institutional investors reduces market information asymmetry. However, it is further established in this paper that a relatively higher level of institutional ownership may attenuate this effect because there is a tendency for institutional owners to exploit private ESG information gained through their position.

Suggested Citation

  • Renard Y. J. Siew & Maria C. A. Balatbat & David G. Carmichael, 2016. "The impact of ESG disclosures and institutional ownership on market information asymmetry," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 23(4), pages 432-448, October.
    • Handle: RePEc:taf:raaexx:v:23:y:2016:i:4:p:432-448
    DOI: 10.1080/16081625.2016.1170100
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    1. Derwall, J. & Günster, N.K. & Bauer, R. & Koedijk, C.G., 2004. "The Eco-Efficiency Premium Puzzle," ERIM Report Series Research in Management ERS-2004-043-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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    Cited by:

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    2. Liu, Min & Guo, Tongji & Ping, Weiying & Luo, Liangqing, 2023. "Sustainability and stability: Will ESG investment reduce the return and volatility spillover effects across the Chinese financial market?," Energy Economics, Elsevier, vol. 121(C).
    3. Yu, Ellen Pei-yi & Luu, Bac Van, 2021. "International variations in ESG disclosure – Do cross-listed companies care more?," International Review of Financial Analysis, Elsevier, vol. 75(C).
    4. Fengyan Wang & Ziyuan Sun, 2022. "Does the Environmental Regulation Intensity and ESG Performance Have a Substitution Effect on the Impact of Enterprise Green Innovation: Evidence from China," IJERPH, MDPI, vol. 19(14), pages 1-24, July.
    5. Ellen Pei‐yi Yu & Alessandra Tanda & Bac Van Luu & Dominic H. Chai, 2021. "Environmental transparency and investors' risk perception: Cross‐country evidence on multinational corporations' sustainability practices and cost of equity," Business Strategy and the Environment, Wiley Blackwell, vol. 30(8), pages 3975-4000, December.
    6. Bofinger, Yannik & Heyden, Kim J. & Rock, Björn, 2022. "Corporate social responsibility and market efficiency: Evidence from ESG and misvaluation measures," Journal of Banking & Finance, Elsevier, vol. 134(C).
    7. Bharat Kumar Meher & Iqbal Thonse Hawaldar & Latasha Mohapatra & Cristi Spulbar & Ramona Birau, 2020. "The Effects of Environment, Society and Governance Scores on Investment Returns and Stock Market Volatility," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 234-239.
    8. Chauhan, Yogesh & Kumar, Surya B., 2018. "Do investors value the nonfinancial disclosure in emerging markets?," Emerging Markets Review, Elsevier, vol. 37(C), pages 32-46.
    9. Sharma, Gagan Deep & Tiwari, Aviral Kumar & Talan, Gaurav & Jain, Mansi, 2021. "Revisiting the sustainable versus conventional investment dilemma in COVID-19 times," Energy Policy, Elsevier, vol. 156(C).
    10. Chauhan, Yogesh & Kumar, Surya Bhushan, 2019. "The value relevance of nonfinancial disclosure: Evidence from foreign equity investment," Journal of Multinational Financial Management, Elsevier, vol. 52.
    11. del Río, Cristina & López-Arceiz, Francisco J. & Muga, Luis, 2023. "Do sustainability disclosure mechanisms reduce market myopia? Evidence from European sustainability companies," International Review of Financial Analysis, Elsevier, vol. 87(C).
    12. Luo, Chunhua & Wei, Dianlong & He, Feng, 2023. "Corporate ESG performance and trade credit financing – Evidence from China," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 337-351.
    13. Wu, Zhenshu, 2023. "Essays in corporate finance and ESG," Other publications TiSEM fe6f9604-d0c5-46f3-9492-f, Tilburg University, School of Economics and Management.

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