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The impact of ESG news on the volatility of the Portuguese stock market
Publication . Zanatto, Cássio; Catalão-Lopes, Margarida; Pina, Joaquim P.; Carrilho-Nunes, Inês; DCSA - Departamento de Ciências Sociais Aplicadas; MARE - Centro de Ciências do Mar e do Ambiente; John Wiley & Sons, Ltd.
This paper assesses how environmental, social, and governance (ESG) news influence Portuguese stock market volatility depending on the business cycle. Given the lack of an adequate index to capture the effects of ESG media on the Portuguese stock market, a News Sentiment Index is developed. This index, which captures positive and negative ESG news on companies listed in the Portuguese Stock Index (PSI-20), is then used as an external regressor in symmetric and asymmetric GARCH-type models employed to model the stock market volatility. Results show that during non-crisis periods ESG news reduce returns' volatility, and that when considering the period preceding the financial crisis the disclosure content (positive or negative) of the news matter. However, during economic downturns, neither the amount nor the content disclosure of ESG news affect volatility; thus, ESG preoccupations might no longer be paramount.
Pretending to be Socially Responsible?
Publication . Catalão-Lopes, Margarida; Pina, Joaquim P.; Costa, Ana S.; MARE - Centro de Ciências do Mar e do Ambiente; DCSA - Departamento de Ciências Sociais Aplicadas; Alexandru Ioan Cuza - University of Iasi
Extant evidence on corporate social responsibility (CSR) shows that consumers are willing to pay a premium if they infer that the firm is truly "prosocial" (i.e if it is altruistic), but their valuation of the product will not increase as much (and may even decrease) if they believe the company has an ulterior motive for CSR (i.e. if the firm is opportunistic). We pose that the CSR level of investment can be strategically used as a signalling tool to help consumers identify the true nature of the firm and solve this incomplete information problem. Using a signalling game, where altruistic firms want to express their nature and opportunistic ones want to conceal it, we explore the relative effectiveness of consumers’ premiums and penalties (expressed as demand increases or decreases, respectively) in the promotion of corporate truth-revealing behaviour. We also characterize the conditions for market equilibria in which altruistic firms are distinguished from opportunistic ones, allowing consumers to solve the information asymmetry and, with that, influence firms’ profits. Contrary to what might be expected, we show that rewards for altruistic CSR and penalties for opportunistic CSR are not symmetrically effective. Our results help companies to improve their CSR decisions, by understanding how consumers solve the information asymmetry regarding the true nature of the CSR investments. Especially for altruistic firms, this may be important to guarantee that CSR effort and expenses are not just a cost but turn into higher revenues and profits.
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Fundação para a Ciência e a Tecnologia
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3599-PPCDT
Número da atribuição
2022.08870.PTDC