Market responses to ESG amid signs of ESG De-institutionalization: evidence from the 2024 economic shock and Trump’s election victory

IF 7.4 2区经济学 Q1 BUSINESS, FINANCE

Finance Research Letters Pub Date : 2025-05-08 DOI:10.1016/j.frl.2025.107457

Haitian Wei , Chai-Aun Ooi , Rasidah Mohd-Rashid

{"title":"Market responses to ESG amid signs of ESG De-institutionalization: evidence from the 2024 economic shock and Trump’s election victory","authors":"Haitian Wei , Chai-Aun Ooi , Rasidah Mohd-Rashid","doi":"10.1016/j.frl.2025.107457","DOIUrl":null,"url":null,"abstract":"<div><div>Amid the recent ESG de-institutionalization by major financial institutions, this study investigates market responses to ESG factors during two major events that shake the U.S. stock market in 2024: (1) an economic shock and (2) a political shock tied to Trump’s election victory. Overall, the market reacts negatively to higher-ESG stocks during both events. However, the economic shock does not trigger a significant effect of ESG on the returns of stocks held by institutional or retail strategic traders, whereas the political shock does, particularly reflecting a shared preference for stocks with stronger governance performance. We also find that ESG performance in fully free-floated stocks has a significantly negative impact on returns only during the political shock, suggesting that informed traders capitalized on Trump’s anti-ESG narrative. Ultimately, our findings imply that the market increasingly values ESG through the lens of regulatory and institutional support, rather than viewing it solely as a stakeholder-driven imperative for sustainability.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"81 ","pages":"Article 107457"},"PeriodicalIF":7.4000,"publicationDate":"2025-05-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1544612325007160","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

Amid the recent ESG de-institutionalization by major financial institutions, this study investigates market responses to ESG factors during two major events that shake the U.S. stock market in 2024: (1) an economic shock and (2) a political shock tied to Trump’s election victory. Overall, the market reacts negatively to higher-ESG stocks during both events. However, the economic shock does not trigger a significant effect of ESG on the returns of stocks held by institutional or retail strategic traders, whereas the political shock does, particularly reflecting a shared preference for stocks with stronger governance performance. We also find that ESG performance in fully free-floated stocks has a significantly negative impact on returns only during the political shock, suggesting that informed traders capitalized on Trump’s anti-ESG narrative. Ultimately, our findings imply that the market increasingly values ESG through the lens of regulatory and institutional support, rather than viewing it solely as a stakeholder-driven imperative for sustainability.

查看原文本刊更多论文

在ESG去制度化迹象中，市场对ESG的反应：来自2024年经济冲击和特朗普当选的证据

在最近主要金融机构将ESG去机构化的背景下，本研究调查了在2024年撼动美国股市的两大事件中市场对ESG因素的反应：(1)经济冲击和(2)与特朗普当选有关的政治冲击。总体而言，在这两个事件中，市场对esg水平较高的股票的反应都是负面的。然而，经济冲击不会引发ESG对机构或零售策略交易者持有的股票回报的显著影响，而政治冲击则会，特别是反映出对治理绩效较强的股票的共同偏好。我们还发现，只有在政治冲击期间，完全自由流通股票的ESG表现才会对回报产生显著的负面影响，这表明知情的交易员利用了特朗普的反ESG言论。最终，我们的研究结果表明，通过监管和制度支持，市场越来越重视ESG，而不仅仅是将其视为利益相关者驱动的可持续发展的必要条件。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Finance Research Letters BUSINESS, FINANCE-

CiteScore

11.10

自引率

14.40%

发文量

863

期刊介绍： Finance Research Letters welcomes submissions across all areas of finance, aiming for rapid publication of significant new findings. The journal particularly encourages papers that provide insight into the replicability of established results, examine the cross-national applicability of previous findings, challenge existing methodologies, or demonstrate methodological contingencies. Papers are invited in the following areas: Actuarial studies Alternative investments Asset Pricing Bankruptcy and liquidation Banks and other Depository Institutions Behavioral and experimental finance Bibliometric and Scientometric studies of finance Capital budgeting and corporate investment Capital markets and accounting Capital structure and payout policy Commodities Contagion, crises and interdependence Corporate governance Credit and fixed income markets and instruments Derivatives Emerging markets Energy Finance and Energy Markets Financial Econometrics Financial History Financial intermediation and money markets Financial markets and marketplaces Financial Mathematics and Econophysics Financial Regulation and Law Forecasting Frontier market studies International Finance Market efficiency, event studies Mergers, acquisitions and the market for corporate control Micro Finance Institutions Microstructure Non-bank Financial Institutions Personal Finance Portfolio choice and investing Real estate finance and investing Risk SME, Family and Entrepreneurial Finance