The Irrelevance of ESG Disclosure to Retail Investors: Evidence from Robinhood

37 Pages Posted: 12 Jun 2020

See all articles by Austin Moss

Austin Moss

University of Iowa - Department of Accounting

James P. Naughton

University of Virginia, Darden School of Business

Clare Wang

University of Colorado at Boulder - Leeds School of Business

Date Written: May 19, 2020

Abstract

Using an hourly dataset on retail investor security positions from Robinhood Markets, we find that ESG disclosures are irrelevant to retail investors’ portfolio allocation decisions. The response to ESG press releases by retail investors is no different than the routine portfolio adjustments that occur on non-event days. In contrast, these same investors make economically meaningful changes to their portfolios in response to press releases that do not pertain to ESG, especially those that pertain to earnings announcements. Our findings are not due to a lack of statistical power or other data shortcomings. Our conclusions contrast with evidence from experimental studies that retail investors respond favorably to ESG disclosures. In addition, while prior ESG studies have generally viewed investors as a single homogeneous group, our findings suggest that it is important to distinguish between retail and institutional investors.

Keywords: ESG, Retail Investors, Corporate Social Responsibility

JEL Classification: M41, D83, G14, G32, G34

Suggested Citation

Moss, Austin and Naughton, James P. and Wang, Clare, The Irrelevance of ESG Disclosure to Retail Investors: Evidence from Robinhood (May 19, 2020). Available at SSRN: https://ssrn.com/abstract=3604847 or http://dx.doi.org/10.2139/ssrn.3604847

Austin Moss

University of Iowa - Department of Accounting ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States

James P. Naughton

University of Virginia, Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Clare Wang (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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