Scientific publication

Finance Research Letters: Rating changes revisited: New evidence on short-term ESG momentum

Environmental, social and governance (ESG) ratings are mainstream in sustainable finance. This paper provides important evidence on the effects of ESG rating changes on companies’ stock performance. We contribute to the ESG rating change literature by replicating the calendar-time portfolio analysis for US stocks from Shanaev and Ghimire (2022), which found economically significant results. We find contradictory results, which are robust to the omnipresent rating heterogeneity problem. More precisely, we find that rating changes do not significantly affect stock performance in the short-term. Four methodological mistakes in the original study explain the differences in the results.

Cauthorn, T., Dumrose, M., Eckert, J., Klein, C., & Zwergel, B. (2023). Rating changes revisited: New evidence on short-term ESG momentum. Finance Research Letters, 54, 103703.

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