Abstract
This paper investigates the impact of ESG disclosures and institutional ownership on market information asymmetry for 683 firms listed on the New York Stock Exchange for years 2007–2011. Overall, the results suggest that there is a statistically significant negative relationship between ESG disclosures and bid-ask spread and that the presence of institutional investors reduces market information asymmetry. However, it is further established in this paper that a relatively higher level of institutional ownership may attenuate this effect because there is a tendency for institutional owners to exploit private ESG information gained through their position.
Acknowledgements
We are thankful for the helpful comments received from Peter Clarkson, Gordon Richardson and participants at the 2014 APJAE Symposium on Environmental, Social and Governance Issues in the Asia Pacific Region.