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ESG News, Future Cash Flows, and Firm Value

Author

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  • FRANÇOIS DERRIEN
  • PHILIPP KRÜGER
  • AUGUSTIN LANDIER
  • TIANHAO YAO

Abstract

We investigate the expected consequences of negative environmental, social, and governance (ESG) news on firms' future profits. After learning about negative ESG news, analysts significantly downgrade their forecasts at short and longer horizons. Negative ESG news affects forecasts more strongly at longer horizons than other types of negative corporate news. The negative revisions of earnings forecasts following negative ESG news largely reflect expectations of lower future sales, rather than higher future costs. Quantitatively, forecast revisions can explain most of the negative impacts of ESG news on firm value. Analysts are correct to revise forecasts downward following negative ESG news.

Suggested Citation

  • François Derrien & Philipp Krüger & Augustin Landier & Tianhao Yao, 2025. "ESG News, Future Cash Flows, and Firm Value," Journal of Finance, American Finance Association, vol. 80(6), pages 3499-3554, December.
    • Handle: RePEc:bla:jfinan:v:80:y:2025:i:6:p:3499-3554
    DOI: 10.1111/jofi.13498
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    Cited by:

    1. Deng, Guoying & Ma, Shibo & Yan, Jingzhou & Shuai, Can & Liu, Hanying, 2024. "Dissecting the impact of the three E, S, G pillars on credit risk," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 301-313.
    2. Oehler, Andreas & Horn, Matthias, 2025. "Contemporaneous ESG ratings and idiosyncratic stock risk: Empirical evidence on measures of market consensus and dispersion," International Review of Economics & Finance, Elsevier, vol. 103(C).
    3. Carina Cuculiza & Alok Kumar & Wei Xin & Chendi Zhang, 2026. "Temperature Sensitivity, Mispricing, and Predictable Returns," Management Science, INFORMS, vol. 72(3), pages 1918-1958, March.
    4. Li, Iris & Akyildirim, Erdinc & Conlon, Thomas & Corbet, Shaen, 2025. "Corporate reputational dynamics and their impact on global commodity markets," Journal of Commodity Markets, Elsevier, vol. 37(C).
    5. Alex Ng & Randall Kimmel, 2026. "Doing good – good for business? The investment performance of European members of the United nations global compact," SN Business & Economics, Springer, vol. 6(1), pages 1-26, January.
    6. Orpiszewski, Tomasz & Thompson, Mark, 2025. "Beyond borders: Asset price reaction to ESG incidents at home and abroad," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    7. Yang, Runze & Wu, Junwei & Yang, Cunyi & Albitar, Khaldoon, 2024. "Far-sighted through mitigating risk: Directors and officers liability insurance and corporate ESG performance," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    8. Gao, Ning & Jiang, Wei & Jin, Jiaxu, 2024. "Unravelling investors’ diverging responses to U.S. firms' global ESG incidents," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    9. Kopita, Anastasia & Petrou, Zacharias, 2025. "Does analyst ESG experience matter?," The British Accounting Review, Elsevier, vol. 57(5).

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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