Starks, Venkat, and Zhu (2023)

Starks, Laura, Parth Venkat, and Qifei Zhu. “Corporate ESG Profiles and Investor Horizons.” Working paper (University of Texas, Austin), 2023.

From the authors' abstract: 

“We find that long-term institutional investors tilt their portfolios towards firms with better ESG profiles... We test whether several theoretically motivated mechanisms can explain the relationship between investor horizon and firms' ESG profiles. Long-term investor patience around poor earnings announcements suggests that investors evaluate short and long-term information differently. In addition, our evidence shows that limits-to-arbitrage plays a role as we find investors' ESG tilting weakens following regulatory shocks that shorten their horizon. We find no evidence that clientele catering drives this relationship.”

LK comment: Outstanding paper, an earlier version won the 2021 Moskowitz Prize

Moskowitz Prize research brief: https://www.kellogg.northwestern.edu/marcomm/materials/initiatives/images/2021-Moskowitz-Research-Brief-Corporate-ESG-Profiles-and-Investor-Horizons.pdf

Link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3049943