Does Money Talk? Market Discipline through Selloffs and Boycotts

Résumé

an market discipline affect corporate environmental and social (E&S) policies? Using international data on corporate E&S news, we show that negative coverage of firms’ E&S policies affects negatively E&S-conscious investors’ demand for stocks. As a consequence, firms with more E&S-motivated investors experience larger temporary declines in valuations and subsequently improve their E&S policies. Such improvements are concentrated among firms with more informative stock prices and are not due to investor engagements, suggesting that firms learn about shareholders’ preferences from stock prices. Sales in E&S-conscious countries also decrease following negative E&S risk, but are not consistently associated with improvements in E&S policies.

Mots-clés

Corporate social responsibility; Price Informativeness; Real effects of financial markets; Institutional investors; Sustainability; Corporate governance; Culture;

Codes JEL

G15: International Financial Markets
G23: Non-bank Financial Institutions • Financial Instruments • Institutional Investors
G30: General
M14: Corporate Culture • Diversity • Social Responsibility