ESG Expertise and Analysts' Roles in Capital Markets
Date
Authors
Wei, Yixin Lucy
Cahan, Steven F
Chen, Li
Supervisor
Item type
Journal Article
Degree name
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
Financial analysts are key information intermediaries and external monitors in capital markets, producing earnings forecasts and revisions that shape investors' expectations and asset prices. This study examines whether analysts differ in their ability to process an increasingly important but complex information dimension, environmental, social, and governance (ESG) information, and how such differences affect forecast performance, market reactions, and monitoring outcomes. We use the extent of prior exposure to ESG information as a proxy for analyst ESG expertise and examine its influence on their roles in the capital market. For the information intermediary role, we find that analysts with more industry-specific ESG expertise issue more accurate forecasts and their upward forecast revisions evoke stronger market reactions, indicating that ESG expertise is positively related to analysts' forecast quality. In terms of the external monitor role, we find that more coverage by analysts with greater industry-specific ESG expertise (ESG expert analysts) is positively associated with firms' ESG performance. Additional analysis shows that ESG expert analyst coverage increases after a firm receives its initial third-party ESG rating, suggesting that ESG expert analysts do consider ESG-related firm information when making coverage decisions.Description
Keywords
1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment, 1801 Law, Finance, 3501 Accounting, auditing and accountability, 3502 Banking, finance and investment, 3801 Applied economics, Financial analysts, Forecast accuracy, Market reaction, Analyst expertise, Analyst coverage, ESG
Source
International Review of Financial Analysis, ISSN: 1057-5219 (Print); 1873-8079 (Online), Elsevier, 112. doi: 10.1016/j.irfa.2026.105117
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© 2026 The Authors. Published by Elsevier Inc. This is an open access article distributed under the terms of the Creative Commons CC-BY license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. You are not required to obtain permission to reuse this article.