IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v17y2025i19p8922-d1766790.html

When Authenticity Doesn’t Pay: Validating an ESG Communication Authenticity Framework and Explaining Stakeholder–Investor Decoupling

Author

Listed:
  • Yiu-Fai Chan

    (International Foundation Year, Salford Languages, University of Salford, Maxwell Building, Salford M5 4WT, UK)

  • Lawrence M. Ngoe

    (Business Management and MRes Leadership and Strategy, Greater Manchester Business School, University of Greater Manchester, Great Moor Street, Bolton BL1 1SW, UK)

  • Moshood Olatunde Oladapo

    (School of Leadership, Marketing and Management, Faculty of Business and Law, De Montfort University, Dubai Internet City, Building 12, Dubai 501870, United Arab Emirates)

  • Godswill Osemeke

    (Business Management and MRes Leadership and Strategy, Greater Manchester Business School, University of Greater Manchester, Great Moor Street, Bolton BL1 1SW, UK)

  • Imran Akhtar

    (Business Management and MRes Leadership and Strategy, Greater Manchester Business School, University of Greater Manchester, Great Moor Street, Bolton BL1 1SW, UK)

Abstract

Environmental, Social, and Governance (ESG) communications have proliferated across Fortune 500 companies, yet no validated frameworks exist for systematically distinguishing authentic from superficial positioning. This study develops and validates the Dynamic Authenticity Evaluation Model (DAEM), measuring three interactive dimensions of ESG communication authenticity: operational alignment, temporal consistency, and communication specificity. Through dual-evaluator protocols applied to eight mega-cap companies, DAEM achieves excellent inter-rater reliability (ICC = 0.85; Krippendorff’s α = 0.83). An event study analysis across sixteen major ESG announcements reveals no significant correlation between communication authenticity and abnormal stock returns (r = 0.289; p = 0.491), with effects being bounded below ±0.30% cumulative abnormal returns through equivalence testing. Preliminary stakeholder analysis suggests differential authenticity sensitivity, with employee engagement showing a stronger association with DAEM scores (r = 0.423) than market reactions (r = 0.289). Results indicate that authentic ESG communications influence non-market stakeholders more than short-term stock prices, suggesting that market value creation requires operational rather than symbolic approaches, while authentic communication remains important for stakeholder relationship management.

Suggested Citation

  • Yiu-Fai Chan & Lawrence M. Ngoe & Moshood Olatunde Oladapo & Godswill Osemeke & Imran Akhtar, 2025. "When Authenticity Doesn’t Pay: Validating an ESG Communication Authenticity Framework and Explaining Stakeholder–Investor Decoupling," Sustainability, MDPI, vol. 17(19), pages 1-38, October.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:19:p:8922-:d:1766790
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/17/19/8922/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/17/19/8922/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Amir Amel-Zadeh & George Serafeim, 2018. "Why and How Investors Use ESG Information: Evidence from a Global Survey," Financial Analysts Journal, Taylor & Francis Journals, vol. 74(3), pages 87-103, July.
    2. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter.
    3. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    4. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    5. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    6. repec:pri:cepsud:91malkiel is not listed on IDEAS
    7. repec:eme:aaaj00:09513579910270138 is not listed on IDEAS
    8. Markus J. Milne & Ralph W. Adler, 1999. "Exploring the reliability of social and environmental disclosures content analysis," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 12(2), pages 237-256, May.
    9. Ali Alshehhi & Haitham Nobanee & Nilesh Khare, 2018. "The Impact of Sustainability Practices on Corporate Financial Performance: Literature Trends and Future Research Potential," Sustainability, MDPI, vol. 10(2), pages 1-25, February.
    10. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    11. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    12. Thomas P. Lyon & John W. Maxwell, 2011. "Greenwash: Corporate Environmental Disclosure under Threat of Audit," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 3-41, March.
    13. Seong Mi Bae & Md. Abdul Kaium Masud & Jong Dae Kim, 2018. "A Cross-Country Investigation of Corporate Governance and Corporate Sustainability Disclosure: A Signaling Theory Perspective," Sustainability, MDPI, vol. 10(8), pages 1-16, July.
    14. Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, vol. 42(8), pages 1199-1214, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ye, Dezhu & Liu, Shasha & Kong, Dongmin, 2013. "Do efforts on energy saving enhance firm values? Evidence from China's stock market," Energy Economics, Elsevier, vol. 40(C), pages 360-369.
    2. Paul Handro & Bogdan Dima, 2024. "Analyzing Financial Markets Efficiency: Insights from a Bibliometric and Content Review," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 119-175, May.
    3. Vicentina Gomes, Liliane & Odálio dos Santos, José & Lana Silva, Cristiane & Ferreira de Souza, Maurício, 2018. "Divulgações de informações e o efeito no retorno de ações da maior empresa de educação listada na B3 (Brasil, Bolsa, Balcão) [Information disclosures and the effect on the return of stocks of the largest education company listed on B3 (Brasil, Bol," MPRA Paper 93123, University Library of Munich, Germany, revised 30 May 2018.
    4. Shilong Han, 2025. "The Effect of High-Speed Rail Connectivity on Capital Market Earnings Forecast Error: Evidence from the Chinese Stock Market," Papers 2512.03709, arXiv.org.
    5. Nunes, Mauro Fracarolli, 2018. "Supply chain contamination: An exploratory approach on the collateral effects of negative corporate events," European Management Journal, Elsevier, vol. 36(4), pages 573-587.
    6. Martin Lausegger, 2021. "Stock markets in turmoil: political institutions and the impact of elections," Economics and Politics, Wiley Blackwell, vol. 33(1), pages 172-204, March.
    7. Mitja Steinbacher & Matej Steinbacher & Matjaz Steinbacher, 2025. "Using CNN to Model Stock Prices," Computational Economics, Springer;Society for Computational Economics, vol. 66(6), pages 5299-5340, December.
    8. Samuel Tabot Enow, 2023. "Investigating Joint Market Hypothesis during Periods of Financial Distress and its Implications," International Journal of Economics and Financial Issues, Econjournals, vol. 13(2), pages 46-50, March.
    9. Daniel Martin Katz & Michael J Bommarito II & Tyler Soellinger & James Ming Chen, 2015. "Law on the Market? Abnormal Stock Returns and Supreme Court Decision-Making," Papers 1508.05751, arXiv.org, revised May 2017.
    10. Teresa Valeria Parise & Vijay Shenai, 2018. "The Value Effect of Financial Reform on U.K. Banks and Insurance Companies," IJFS, MDPI, vol. 6(3), pages 1-28, September.
    11. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    12. Fisch, Christian & Momtaz, Paul P., 2020. "Institutional investors and post-ICO performance: an empirical analysis of investor returns in initial coin offerings (ICOs)," Journal of Corporate Finance, Elsevier, vol. 64(C).
    13. Philipp M. Schlumpf & Markus M. Schmid & Heinz Zimmermann, 2008. "The First‐ and Second‐Hand Effect of Analysts' Stock Recommendations: Evidence from the Swiss Stock Market," European Financial Management, European Financial Management Association, vol. 14(5), pages 962-988, November.
    14. Matthias M. M. Buehlmaier & Kit Pong Wong, 2020. "Should investors join the index revolution? Evidence from around the world," Journal of Asset Management, Palgrave Macmillan, vol. 21(3), pages 192-218, May.
    15. Dionysia Dionysiou, 2015. "Choosing Among Alternative Long-Run Event-Study Techniques," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 158-198, February.
    16. Szymon Lis & Robert Slepaczuk & Paweł Sakowski, 2024. "Explaining and Forecasting Abnormal Returns and Volume by Investor Sentiment Indicators," Working Papers 2024-18, Faculty of Economic Sciences, University of Warsaw.
    17. Alfonso A. Rojo Ramírez & Maria J. Martínez Romero, 2018. "Required and obtained equity returns in privately held businesses: the impact of family nature—evidence before and after the global economic crisis," Review of Managerial Science, Springer, vol. 12(3), pages 771-801, July.
    18. David M. Ritzwoller & Joseph P. Romano, 2019. "Uncertainty in the Hot Hand Fallacy: Detecting Streaky Alternatives to Random Bernoulli Sequences," Papers 1908.01406, arXiv.org, revised Apr 2021.
    19. Pieter Nel & Renee van Eyden, 2026. "From News to Noise: Does Media Sentiment Drive Stock Market Volatility?," Working Papers 202605, University of Pretoria, Department of Economics.
    20. Bell, Peter N, 2013. "New Testing Procedures to Assess Market Efficiency with Trading Rules," MPRA Paper 46701, University Library of Munich, Germany.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    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:gam:jsusta:v:17:y:2025:i:19:p:8922-:d:1766790. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.