TY - JOUR
T1 - The ESG stopping effect
T2 - Do investor reactions differ across the lifespan of ESG initiatives?
AU - Garavaglia, Shannon
AU - Van Landuyt, Ben W.
AU - White, Brian J.
AU - Irwin, Julie
N1 - Funding Information:
We thank Hun Tong Tan (editor), Mark Peecher (conference editor), two anonymous reviewers, Nicole Cade, Shana Clor-Proell, Donnie Young, workshop participants at Georgia Tech, the University of Arizona, the University of Southern California, the University of Pittsburgh, the University of Texas at Austin, and attendees at the FARS Midyear Meeting, the Lone Star Accounting Conference, the ABO Midyear Meeting, and the AOS Conference on Accounting for Sustainability and Climate Change for their helpful comments. We are grateful for research funding from the McCombs School of Business, The University of Texas at Austin .
Funding Information:
We thank Hun Tong Tan (editor), Mark Peecher (conference editor), two anonymous reviewers, Nicole Cade, Shana Clor-Proell, Donnie Young, workshop participants at Georgia Tech, the University of Arizona, the University of Southern California, the University of Pittsburgh, the University of Texas at Austin, and attendees at the FARS Midyear Meeting, the Lone Star Accounting Conference, the ABO Midyear Meeting, and the AOS Conference on Accounting for Sustainability and Climate Change for their helpful comments. We are grateful for research funding from the McCombs School of Business, The University of Texas at Austin.
Publisher Copyright:
© 2023 Elsevier Ltd
PY - 2023
Y1 - 2023
N2 - In general, investors respond favorably to firms' ongoing ESG initiatives. In a series of experiments, we examine whether their reactions differ across ESG initiatives' lifespan. In particular, we predict and find evidence of an “ESG stopping effect.” Even when investors react similarly to the launch of new initiatives that are ESG-related versus non-ESG-related (i.e., general business initiatives), they react more negatively to companies stopping ESG initiatives compared to stopping general business initiatives. We further show that this more pronounced negative response to stopping ESG initiatives stems from investors' sensitivity to, and feelings of responsibility for, the undesirable ethical considerations inherent to stopping ESG initiatives. That is, ethical considerations related to a firm's initiatives loom larger for investors' judgments when initiatives are stopped compared to when they are started. Finally, we find that the ESG stopping effect is exacerbated when ESG initiatives are relatively more effective, and is reduced but not eliminated when firms provide financial justification for ending an ESG initiative.
AB - In general, investors respond favorably to firms' ongoing ESG initiatives. In a series of experiments, we examine whether their reactions differ across ESG initiatives' lifespan. In particular, we predict and find evidence of an “ESG stopping effect.” Even when investors react similarly to the launch of new initiatives that are ESG-related versus non-ESG-related (i.e., general business initiatives), they react more negatively to companies stopping ESG initiatives compared to stopping general business initiatives. We further show that this more pronounced negative response to stopping ESG initiatives stems from investors' sensitivity to, and feelings of responsibility for, the undesirable ethical considerations inherent to stopping ESG initiatives. That is, ethical considerations related to a firm's initiatives loom larger for investors' judgments when initiatives are stopped compared to when they are started. Finally, we find that the ESG stopping effect is exacerbated when ESG initiatives are relatively more effective, and is reduced but not eliminated when firms provide financial justification for ending an ESG initiative.
KW - ESG
KW - Ethicality
KW - Investor judgment and decision-making
UR - http://www.scopus.com/inward/record.url?scp=85147365533&partnerID=8YFLogxK
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U2 - 10.1016/j.aos.2023.101441
DO - 10.1016/j.aos.2023.101441
M3 - Article
AN - SCOPUS:85147365533
SN - 0361-3682
JO - Accounting, Organizations and Society
JF - Accounting, Organizations and Society
M1 - 101441
ER -