Gibson, Krueger, Riand and Schmidt (2019)

Gibson, Rajna , Philipp Krueger, Nadine Riand, and Peter Schmidt. “ESG rating disagreement and stock returns.” Working paper (University of Geneva), 2019.

From the abstract: “Using a sample of S&P 500 firms between 2013 and 2017, we examine the stock return implications of ESG rating disagreement. We start by documenting that the average correlation between ESG ratings from six prominent rating providers is about 0.46. Surprisingly, the average correlation is lowest for the governance, and highest for the environmental dimension. We also find that disagreement is higher for larger, less profitable firms and for those without a credit rating. We then classify ESG rating providers by the legal origin of the countries in which they are headquartered. Given the more stakeholder-centric model of the firm that is typically found in civil law countries, we hypothesize that disagreement about social ratings among rating providers with a civil law origin is more relevant and should strongly influence stock returns. In a similar spirit, the shareholder primacy of common law countries suggests that disagreement about governance issues among ratings providers with a common law origin should also impact returns. Our empirical results confirm these hypotheses.”

Link:  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3433728