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Laura Starks – UT Austin
28 September @ 3:00 pm - 4:30 pm
We consider motivations for institutional investors to prefer firms with
higher Environmental, Social and Governance (ESG) profiles. We find that
such preferences depend critically on investor horizons: Investors with longer
horizons tend to prefer higher ESG firms significantly more than do short-term
investors. Consistent with the importance of investor horizon, we find that
investors behave more patiently toward the high ESG firms in their portfolios
as compared to their other holdings, selling relatively less after negative earn-
ings surprises or poor stock returns. We further support these findings using
changes in the FTSE4Good US Index as shocks to firms’ ESG reputations.