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Generative AI-assisted evaluation of ESG practices and information delays in ESG ratings

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  • Wang, Qishu

Abstract

We explore the time-lag effects of Environmental, Social, and Governance (ESG) practices’ integration within firms from the NASDAQ 100 index, analyzing how this information is reflected over time through Generative AI. By employing ChatGPT-4 to assess ESG progress from 2011 to 2022 in their annual 10-K reports, we identify significant time-lagged effects between the AI-generated evaluations and the ESG ratings, particularly pronounced in the Environmental and Social pillars among firms with mid-range ESG ratings. Our evidence suggests that such information delay in ESG ratings is plausibly driven by reputational herding among firms in their ESG practices, along with potential greenwashing.

Suggested Citation

  • Wang, Qishu, 2025. "Generative AI-assisted evaluation of ESG practices and information delays in ESG ratings," Finance Research Letters, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:finlet:v:74:y:2025:i:c:s1544612325000224
    DOI: 10.1016/j.frl.2025.106757
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    Cited by:

    1. Congluo Xu & Yu Miao & Yiling Xiao & Chengmengjia Lin, 2025. "DeepGreen: Effective LLM-Driven Green-washing Monitoring System Designed for Empirical Testing -- Evidence from China," Papers 2504.07733, arXiv.org.

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    More about this item

    Keywords

    ESG; Information lag; Artificial intelligence; Herding behavior;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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