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ESG controversies and investor trading behavior in the Korean market

Author

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  • Bang, Jeongseok
  • Ryu, Doojin
  • Yu, Jinyoung

Abstract

This study examines how investor trading behavior changes following environmental, social, and governance (ESG) controversies by analyzing textual news data. We use deep-learning-based natural language processing to classify news articles into specific categories of controversy. ESG controversies generally increase investors’ trading activities regardless of their type, while their reactions differ by ESG pillar. Interestingly, domestic institutions tend to sell stocks with controversies.

Suggested Citation

  • Bang, Jeongseok & Ryu, Doojin & Yu, Jinyoung, 2023. "ESG controversies and investor trading behavior in the Korean market," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s154461232300123x
    DOI: 10.1016/j.frl.2023.103750
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Chung, Hae Jin & Jhang, Hogyu & Ryu, Doojin, 2023. "Impacts of COVID-19 pandemic on corporate cash holdings: Evidence from Korea," Emerging Markets Review, Elsevier, vol. 56(C).
    2. Cheng, Rui & Frijns, Bart & Kim, Hyeongjun & Ryu, Doojin, 2024. "Effects of option incentive compensation on corporate innovation: The case of China," Economic Systems, Elsevier, vol. 48(1).
    3. Niu, Bingcheng, 2024. "Government environmental protection expenditure and national ESG performance: Global evidence," Innovation and Green Development, Elsevier, vol. 3(2).
    4. Wu, Zihao & Lin, Siliang & Chen, Tianhao & Luo, Chunyang & Xu, Hui, 2023. "Does effective corporate governance mitigate the negative effect of ESG controversies on firm value?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1772-1793.
    5. Seok, Sangik & Cho, Hoon & Ryu, Doojin, 2024. "Dual effects of investor sentiment and uncertainty in financial markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 300-315.
    6. Ryu, Doojin & Webb, Robert I. & Yu, Jinyoung, 2024. "Stock price synchronicity and market liquidity: The role of funding liquidity," Finance Research Letters, Elsevier, vol. 61(C).
    7. Bang, Jeongseok & Ryu, Doojin & Webb, Robert I., 2023. "ESG controversy as a potential asset-pricing factor," Finance Research Letters, Elsevier, vol. 58(PA).
    8. Bang, Jeongseok & Ryu, Doojin, 2024. "ESG factors and the cross-section of expected stock returns: A LASSO-based approach," Finance Research Letters, Elsevier, vol. 65(C).
    9. Muhammad Tahir & Sufyan Ali & Ayesha Sohail & Ying Zhang & Xiaohua Jin, 2024. "Unlocking Online Insights: LSTM Exploration and Transfer Learning Prospects," Annals of Data Science, Springer, vol. 11(4), pages 1421-1434, August.
    10. Sungchang Kang & Jeongseok Bang & Doojin Ryu, 2024. "Female CEOs’ risk management and earnings performance during the financial crisis," Asian Business & Management, Palgrave Macmillan, vol. 23(1), pages 110-138, February.
    11. Yang, Sharon S. & Huang, Jr-Wei & Li, Wei-Hsien, 2024. "Institutional investor stewardship and material sustainability information: Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    ESG; Institutional investor; Investor trading behavior; Natural language processing;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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