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http://dx.doi.org/10.5322/JESI.2022.31.12.1117

The Effect of ESG Information on Investor Information Asymmetry  

Geon Woo (Green Finance Graduate Program, Inha University)
Jong Dae Kim (College of Business Administration, Inha University)
Publication Information
Journal of Environmental Science International / v.31, no.12, 2022 , pp. 1117-1126 More about this Journal
Abstract
This study analyzed the effect of Corporate Social Responsibility and ESG (Environmental, Social and Governance) score on information asymmetry from the perspective of investors, who are important stakeholders of the company. For KOSPI-listed companies from 2017 to 2020, the effect of ESG overall score and each item score (E, S, G) on the bid-ask spread, which is a proxy for information asymmetry, was confirmed. The results are as follows. First, the increase in corporate CSR activities resulted in lowering information asymmetry of investors. It was found that the higher the ESG score, an indicator of CSR activity, the lower the bid-ask spread, which is a proxy variable for information asymmetry. Second, as a result of analysis using ESG scores for each section, information asymmetry decreased as companies with higher scores in the environmental (E) and social (S) aspects, while the governance (G) score did not have a statistically significant effect. The analysis confirmed that corporate CSR activities can contribute to improving market efficiency by resolving information asymmetry of investors and convergence of the stock market into a state of equilibrium. This means that the company's CSR activities are reflected in the investment decision-making, which suggests that the company should consider the investor as a stakeholder in decision-making related to CSR activities.
Keywords
ESG; Corporate social responsibility; Information asymmetry; Bid-Ask Spread;
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