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ESG News, Future Cash Flows, and Firm Value

Author

Listed:
  • François Derrien

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Philipp Krueger

    (UNIGE - Université de Genève = University of Geneva)

  • Augustin Landier

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Tianhao Yao

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

We investigate the expected consequences of negative ESG news on firms' future profits. After learning about negative ESG news, analysts significantly downgrade their forecasts at short and longer horizons. Negative ESG news affect forecasts more strongly at longer horizons than other types of negative corporate news. The negative revisions of earnings forecasts following negative ESG news reflect expectations of lower future sales (rather than higher future costs). Quantitatively, forecast revisions can explain most of the negative impacts of ESG news on firm value. Analysts are correct to revise forecasts downward following negative ESG news and ESG sensitive analysts tend to provide more accurate forecasts.

Suggested Citation

  • François Derrien & Philipp Krueger & Augustin Landier & Tianhao Yao, 2021. "ESG News, Future Cash Flows, and Firm Value," Working Papers hal-03857579, HAL.
    • Handle: RePEc:hal:wpaper:hal-03857579
    DOI: 10.2139/ssrn.3903274
    as

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