IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v81y2025ics1544612325007160.html
   My bibliography  Save this article

Market responses to ESG amid signs of ESG De-institutionalization: evidence from the 2024 economic shock and Trump’s election victory

Author

Listed:
  • Wei, Haitian
  • Ooi, Chai-Aun
  • Mohd-Rashid, Rasidah

Abstract

Amid the recent ESG de-institutionalization by major financial institutions, this study investigates market responses to ESG factors during two major events that shake the U.S. stock market in 2024: (1) an economic shock and (2) a political shock tied to Trump’s election victory. Overall, the market reacts negatively to higher-ESG stocks during both events. However, the economic shock does not trigger a significant effect of ESG on the returns of stocks held by institutional or retail strategic traders, whereas the political shock does, particularly reflecting a shared preference for stocks with stronger governance performance. We also find that ESG performance in fully free-floated stocks has a significantly negative impact on returns only during the political shock, suggesting that informed traders capitalized on Trump’s anti-ESG narrative. Ultimately, our findings imply that the market increasingly values ESG through the lens of regulatory and institutional support, rather than viewing it solely as a stakeholder-driven imperative for sustainability.

Suggested Citation

  • Wei, Haitian & Ooi, Chai-Aun & Mohd-Rashid, Rasidah, 2025. "Market responses to ESG amid signs of ESG De-institutionalization: evidence from the 2024 economic shock and Trump’s election victory," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007160
    DOI: 10.1016/j.frl.2025.107457
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325007160
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.107457?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    ESG; Economic; Recession; Politics; Election; Shock; market response; 2024;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • 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
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007160. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.