Broker In-House ESG Research
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Authors
Wei, Yixin
Cahan, Steven F
Chen, Li
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American Accounting Association
Abstract
This study examines the determinants and consequences of broker in-house ESG research. Using manually collected brokerage ESG research data, we find that the provision of in-house ESG research is positively related to both demand-side factors (client demand, internal demand, and local ESG awareness) and supply-side factors (broker size and coverage of sustainable industries). Regarding the consequences of such research, we find that in-house ESG research is associated with improved earnings forecast accuracy in industries where ESG is more salient. Further, the market reaction to earnings forecast revisions is stronger when equity analysts have access to in-house ESG research. Finally, we observe a consistent pattern suggesting that ESG analysts support equity analysts beyond forecast accuracy, as equity analysts with access to in-house ESG research issue more accurate target prices, more informative recommendation upgrades for ESG-heavy industries, and discuss ESG issues more extensively in their analyst reports.
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3501 Accounting, Auditing and Accountability, 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 1501 Accounting, Auditing and Accountability, Accounting, environmental, social, and governance (ESG), corporate social responsibility, brokerage research, sell-side analysts
Source
The Accounting Review, ISSN: 0001-4826 (Print); 1558-7967 (Online), American Accounting Association, 1-31. doi: 10.2308/tar-2023-0401
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This is the Author's Accepted Manuscript of an article published in The Accounting Review by the American Accounting Association. The final, published version will be available at (see Publisher's version).