Stock market reactions to firm-specific ESG news : an empirical analysis of the effect of positive and negative firmspecific ESG news on stock market returns and trading volume at the Oslo Stock Exchange

This empirical analysis investigates the effect of firm-specific ESG news on daily stock returns and trading volume in the period 2010-2020, and seek to examine whether non-financial ESG news is valuable for investors. We use a sample of the 25 companies in the OBX-Index at the Oslo Stock Exchange as of January 2020. The news data is manually collected from Infomedia’s monitoring portal and consists of 107 positive and 225 negative ESG news from DN.no and E24.no. The event study methodology is conducted to detect abnormal returns and trading volume in short-term event windows around the news publications. No significant results are found in the case of positive ESG news, neither on the event day (0) nor the surrounding days. Thus, this study fails to link positive ESG news to stock market returns. However, our findings provide evidence for negative abnormal returns to negative ESG news on the event day (0) at the 1% level, with an average abnormal return of -0.29%. This finding is in line with our hypothesis, stating that negative ESG news has a significant negative effect on abnormal returns. No significant results are found on the day prior to the negative news and in the two following days, which indicates that the market adjusts rapidly to this information. Furthermore, average abnormal trading volume is only found the day after the publication of positive news (+1), at -0.08% and statistical significance at the 5% level. We do not uncover any abnormal trading volume from negative news. In broader terms, this study investigates investor behavior after the publication of ESG news and finds asymmetric impacts of positive and negative news. Overall, our findings suggests that investors do not reward positive ESG behavior but penalize negative ESG behavior.