Browsing by Author "Frullini, Alessandro"
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- Short-term market responses to ESG signals : evidence from U.S. firms with prior venture capital investmentsPublication . Frullini, Alessandro; Shuwaikh, FátimaThis thesis investigates how financial markets respond to changes in Environmental, Social, and Governance (ESG) ratings among U.S. publicly listed firms that received venture investments during their early stages. Using an event study approach, it analyzes short-term abnormal returns (CARs), post-event return volatility, and the role of firm-specific financial characteristics in shaping market reactions. ESG updates, both overall and by subcomponent, are treated as discrete informational events, with expected returns estimated using the Capital Asset Pricing Model (CAPM) and the Fama–French 5-Factor Model (FF5). The results reveal that social score improvements consistently generate positive and statistically significant CARs over 1 and 3 days windows, suggesting that markets quickly and selectively incorporate ESG information, particularly when it relates to social practices. Changes in environmental and governance scores, by contrast, elicit weaker or insignificant responses. Volatility regressions indicate that ESG improvements, especially in the social and governance dimensions, are associated with modest reductions in post-event return variability, implying updates may also affect perceptions of firm-specific risk. Finally, cross-sectional regressions show that abnormal returns are systematically related to firm-level fundamentals such as size and sales growth. Together, these findings underscore the short-term informational value of ESG ratings, especially their social component, in the context of dynamic, innovation-driven firms. The study contributes to ESG and market efficiency literature by showing that certain ESG signals are not only observed but financially priced by investors.