Publication Type
Journal Article
Version
acceptedVersion
Publication Date
9-2025
Abstract
We investigate the expected consequences of negative environmental, social, and governance (ESG) news on firms' future profits. After learning about negative ESG news, analysts significantly downgrade their forecasts at short and longer horizons. Negative ESG news affects forecasts more strongly at longer horizons than other types of negative corporate news. The negative revisions of earnings forecasts following negative ESG news largely reflect expectations of lower future sales, rather than higher future costs. Quantitatively, forecast revisions can explain most of the negative impacts of ESG news on firm value. Analysts are correct to revise forecasts downward following negative ESG news.
Keywords
ESG, Sustainability, Expectations, Analyst forecasts, Valuation, Discount rate, Cost of capital, Cash flows
Discipline
Corporate Finance | Finance and Financial Management
Research Areas
Finance
Publication
The Journal of Finance
Volume
80
Issue
6
First Page
3499
Last Page
3554
ISSN
0022-1082
Identifier
10.1111/jofi.13498
Publisher
Wiley
Citation
DERRIEN, Francois; KRÜGER, Philipp; LANDIER, Augustin; and YAO, Tianhao.
ESG news, future cash flows, and firm value. (2025). The Journal of Finance. 80, (6), 3499-3554.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7808
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/jofi.13498