The Journal of Finance· 2025Q1
ESG News, Future Cash Flows, and Firm Value
- 47citations
- Q1SCImago
- 2025year
Short summary
Negative ESG news leads analysts to significantly downgrade future earnings forecasts, particularly at longer horizons, by expecting lower future sales, which explains most of the impact on firm value.
AI-generated from the title and abstract; the full text is not read.
Key points
- Negative ESG news causes significant downgrades in analysts' earnings forecasts.
- Forecast downgrades are more pronounced at longer horizons for ESG news than for other negative corporate news.
- Revisions are driven by anticipated lower future sales, not increased future costs.
- Forecast revisions account for the majority of ESG news's negative impact on firm value.
AI-generated from the title and abstract; the full text is not read.
Abstract
ABSTRACT We investigate the expected consequences of negative environmental, social, and governance (ESG) news on firms' future profits. After learning about negative ESG news, analysts significantly downgrade their forecasts at short and longer horizons. Negative ESG news affects forecasts more strongly at longer horizons than other types of negative corporate news. The negative revisions of earnings forecasts following negative ESG news largely reflect expectations of lower future sales, rather than higher future costs. Quantitatively, forecast revisions can explain most of the negative impacts of ESG news on firm value. Analysts are correct to revise forecasts downward following negative ESG news.
The authors' abstract, as published at the source. The Journal of Finance, 2025 · DOI ↗
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