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How different are the (Non-)U.S. investors? Evidence from market reactions to global ESG incidents

Author

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  • Hafeez, Bilal
  • Tosun, Onur Kemal

Abstract

This study examines the differences in responses to ESG incidents between U.S. and non-U.S. investors on a global scale and the possible explanations for this phenomenon. Using a dataset of 150,174 ESG incidents across 30 countries, we find that non-U.S. investors tend to overreact with a 5-day cumulative abnormal return 0.58 % lower compared to their U.S. counterparts. This corresponds to approximately $46.26 Million in additional market value losses. The effect is even stronger for domestic incidents where the return drops by 0.64 %, equivalent to about $51.36 Million in losses. Despite the country-level variation in views on ESG, we document that this divergence stems from differences in efficiency between the U.S. and non-U.S. markets. Non-U.S. investor overreaction disappears once informational efficiency in those markets improves.

Suggested Citation

  • Hafeez, Bilal & Tosun, Onur Kemal, 2025. "How different are the (Non-)U.S. investors? Evidence from market reactions to global ESG incidents," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325013315
    DOI: 10.1016/j.frl.2025.108074
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    Keywords

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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