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Non-financial disclosure and stock price informativeness: the role of country-level institutional factors

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  • Paulo Pereira Silva

    (CEFAGE, Universidade de Évora, Palácio Do Vimioso
    CMVM, Portuguese Securities Commission
    ISCAL - Lisbon Accounting and Business School)

Abstract

This study examines whether non-financial disclosure, and more precisely environmental, social and governance (ESG) disclosure, enhances stock price informativeness with respect to a firm’s future earnings. To do so, we analyse an international sample of listed firms from 24 developed countries and 20 emerging markets and developing economies (EMDEs) in the period 2006–2019. Stock price informativeness is captured by means of the future earnings response coefficient model. Our main research hypothesis postulates that ESG disclosure increases the sensitivity of current stock returns to future earnings. Although the research hypothesis is validated by the data, the impact of ESG disclosure is stronger in developed countries and when the institutional background is more effective. Within this subset of firms, we find a stronger impact amid those with higher information asymmetry and dispersed ownership. In general, ESG disclosure adds little to the information content of stock prices in EMDEs.

Suggested Citation

  • Paulo Pereira Silva, 2025. "Non-financial disclosure and stock price informativeness: the role of country-level institutional factors," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 39(2), pages 225-258, June.
    • Handle: RePEc:kap:fmktpm:v:39:y:2025:i:2:d:10.1007_s11408-025-00466-9
    DOI: 10.1007/s11408-025-00466-9
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • 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
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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