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ESG Disclosure Quality and Stock Price Informativeness: Evidence from Listed Firms in the S&P 500

 

 

Dr. Swapna Kurian

Assistant Professor,

P G Department of Commerce,

Aquinas college, Edakochi, Ernakulam, Kerala, India.

 

 

Abstract - This study investigates the relationship between Environmental, Social, and Governance (ESG) disclosure quality and stock price informativeness among S&P 500 firms from 2012 to 2023. Drawing on signaling theory and information asymmetry frameworks, we hypothesize that higher-quality ESG disclosure enhances the incorporation of firm-specific information into stock prices. Using Bloomberg ESG disclosure scores as our primary measure of disclosure quality and stock price non-synchronicity (1-R²) as a proxy for price informativeness, we employ panel regression analysis with firm and year fixed effects. Our findings indicate a significant positive relationship between ESG disclosure quality and stock price informativeness, suggesting that comprehensive sustainability reporting reduces information asymmetry and facilitates more efficient price discovery. The effect is more pronounced for firms with higher institutional ownership, greater analyst coverage, and in industries with higher environmental sensitivity. Subsample analysis reveals that the governance dimension of ESG disclosure exhibits the strongest association with price informativeness, followed by environmental and social dimensions. These results are robust to alternative measures of informativeness, including idiosyncratic volatility and future earnings response coefficients. Our study contributes to the literature by providing empirical evidence on the informational value of voluntary sustainability disclosure in developed markets.

Key Words:  ESG disclosure; Stock price informativeness; Information asymmetry; Price synchronicity; S&P 500

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