Affiliation:
1. School of Finance Dongbei University of Finance and Economics China
Abstract
AbstractWe examine how analysts respond to non‐financial information about environmental, social responsibility, and corporate governance (ESG) performance and find good ESG performance lessens analysts' optimistic bias. We verify the mediating role of financial transparency that superior ESG performance decreases the level of information asymmetry between firms and analysts and improves financial transparency, thus weakening optimistic bias. Analysts' optimistic bias rises with increased institutional holdings and diminishes with heightened economic policy uncertainty. Social responsibility makes a larger reducing effect on analyst optimistic bias than corporate governance and environmental protection. Our findings have important implications for encouraging firms to emphasize ESG performance and improving stock market efficiency.
Funder
Ministry of Education of the People's Republic of China
National Natural Science Foundation of China