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A signaling game between retail investors and firms: ESG washing as a strategic response

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  • Kim, Heeju
  • Yoo, Hyunjeong

Abstract

This study examines how firms adjust their disclosure strategies in response to retail investor attention, using ESG washing and the Google Search Volume Index. We propose that firms interpret investor behavior through the lens of past monitoring experiences. Empirical results show that firms respond more actively when they have previously encountered signals of investor scrutiny. Moreover, even under similar attention levels, firms exhibit heterogeneous responses depending on their history. These findings suggest that firms strategically adjust their ESG disclosures by interpreting investor signals based on accumulated experience, highlighting the dynamic nature of firm-investor interactions.

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  • Kim, Heeju & Yoo, Hyunjeong, 2025. "A signaling game between retail investors and firms: ESG washing as a strategic response," Finance Research Letters, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finlet:v:83:y:2025:i:c:s154461232500741x
    DOI: 10.1016/j.frl.2025.107482
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