We examine if, and under what conditions, disclosure of sustainability information identified as investor relevant by market-driven innovations in accounting standard-setting, is associated with stock prices reflecting more firm-specific information and thereby lower synchronicity with market and industry returns.
We find that firms voluntarily disclosing more sustainability information, identified as material by the Sustainability Accounting Standards Board (SASB), have lower stock price synchronicity. This result is stronger for firms with higher exposure to sustainability issues, institutional and socially responsible investment fund ownership and coverage from analysts with less firm-specific experience and lower portfolio complexity.
Moreover, we find intra-industry information transfers to firms with low sustainability disclosure within industries with high sustainability disclosure.
We also document that sustainability information not identified by the accounting standard setting process is not associated with stock price synchronicity.
By: Jyothika Grewal, Harvard University, Harvard Business School, Students, Clarissa Hauptmann, Maastricht University – Department of Finance, Students, and George Serafeim, Harvard University – Harvard Business School
See the Harvard working paper here