Corporate ESG Profiles and Investor Horizons
Abstract
ABSTRACT We find that long‐term institutional investors tilt their portfolios toward firms with better Environmental, Social, and Governance (ESG) profiles, in the cross sections of both institutional investor portfolios and the ownership of firms. We test whether several theoretically motivated mechanisms can explain this relationship. Our results that long‐term investors exhibit patience with firms around poor earnings announcements, but quickly sell portfolio firms after negative ES incidents, support the view that long‐ and short‐term investors evaluate information differently. Our evidence shows that limits‐to‐arbitrage play a role, as we find that investors' ESG tilt weakens following regulatory shocks that shorten their horizon.
Fields of Study & Subjects
Corporate Social Responsibility Reporting
Corporate Finance and Governance
Auditing
Earnings Management
Governance
Publication details
- Journal / source
- The Journal of Finance
- Publisher
- Wiley
- Volume
- 81
- Issue
- 2
- Pages
- 603–642
- Publication date
- 8 January 2026
- Language
- EN