Wokeness on the line: AI-based analysis of the Trump effect on corporate ESG communication and market reaction

We study how U.S. firms adapted their ESG and diversity-related communication to Donald Trump’s 2024 re-election and how investors responded. Using S&P 500 earnings call transcripts before and after the election and both LLM- and dictionary-based measures, we document a decline in diversity and environmental statements alongside an increase in governance-related communication. Firms that reduce environmental and diversity emphasis experience significantly negative abnormal returns, while increases in governance-related communication are also associated with negative market reactions, consistent with substitution toward a more politically neutral but less value-relevant ESG dimension. These findings imply that investors continue to value environmental and diversity disclosures even in less supportive political environments, that ESG components are not viewed as interchangeable, and that firms’ strategic shifts in ESG communication can have direct valuation consequences. Importantly, the return effects are detected only using the context-sensitive LLM-based measures, highlighting the importance of contextual language understanding in measuring ESG and diversity-related communication.