Stock Price Synchronicity and Material Sustainability Information

Abstract

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.

The Relationship between Investor Materiality and the Sustainable Development Goals: A Methodological Framework

“…The 169 targets also include means of implementation targets to facilitate outcomes. SDG17, which covers global partnership, comprises 19 such targets, and there is a total of 43 more under SDGs 1-16 (where they are separately identified using small letters after the goal number, e.g., 16.b: Promote and enforce non-discriminatory laws and policies for sustainable development) [21]. Target selection is shown in Table 3.…”

“…In this paper, we present a framework which will enable investors and companies to contribute to the SDGs by identifying the material ESG issues (what investors care about) by sector that also contribute to the SDGs (what the world cares about). Within the broader framework of the performance implications of sustainability investments [10][11][12][13][14] and starting from the evidence of how ESG materiality positively affects financial performance [15,16], we aim at providing a new framing able to answer to the long-standing question of "Can a company do well by doing good?" In particular, will contributing to the SDGs be good for a company's financial performance or will creating these positive externalities actually hurt financial performance?…”

Illiquidity and the Measurement of Stock Price Synchronicity

“…Several studies link synchronicity to factors related to corporate transparency, such as Jin and Myers (), Haggard et al (), Hutton et al (), Gul et al (), Gul et al (), Bartram et al (), Armstrong et al (), Kim et al (), Li et al (), Peterson et al (), Piotroski et al (), Dong et al (), Grewal et al (), and Choi et al (). Other studies such as Bissessur and Hodgson (), Kim and Shi (), Wang and Yu (), and Barth et al () link changes in accounting standards to changes in synchronicity, while Piotroski and Roulstone (), Chan and Hameed (), Crawford et al (), Muslu et al (), and Wang () relate sell‐side analysts' research to the relative amount of firm‐specific information reflected in prices.…”

ESG and Socially Responsible Investment: A Critical Review

“…Combining the results of studies that use many alternative CSR measures with different levels of materiality may lead to biased conclusions about the impact of CSR. This issue is examined in a set of recent papers by Serafeim and various co-authors 4 (Khan, Serafeim, Yoon, 2016;Grewal, 2017, Grewal, Hauptmann, Serafeim, 2017. ) For the six (out of ten) broad industry classifications for which they are available, Khan, Serafeim and Yoon (2016) use the Sustainability Accounting Standards Board (SASB) assessment of which dimensions of CSR are material for firms in each industry to classify the different elements of KLD scores as material or immaterial.…”