ESG Ratings And The Quality Of Analyst Forecasts

ESG(Environment,Social and Governance)is a new investment concept focusing on the trinity of environmental,social and corporate governance responsibilities.It is a powerful starting point to achieve high-quality economic development and practice the new development concept,and also an effective way to implement the sustainable development concept.Since the goal of achieving carbon peak by 2030 and carbon neutrality by 2060 was proposed,the concept of ESG has attracted more and more attention from the financial and business sectors.With the popularity of ESG concept,ESG rating agencies have also sprung up.Based on this background,this paper takes the exogenous impact of Syn Tao Green Finance’s first ESG rating as a quasi-natural experiment,constructs a multitime point differential model,selects A-share listed companies from 2010 to 2019 as the research object,and investigates the impact of ESG rating on the capital market information transfer efficiency from the perspective of analyst earnings forecast quality.The results showed that ESG rating improved the accuracy of analysts’ predictions and reduced the divergence degree of analysts’ predictions.After a series of robustness tests,such as parallel trend test,PSM-DID test,placebo test and replacement of explained variables,the conclusion remained valid.Mechanism test shows that ESG rating increases the information content of the capital market and improves the quality of information disclosure by encouraging the management to disclose voluntarily and inhibiting the opportunistic behaviors such as earnings manipulation,enlarges the information set of analysts’ earnings forecast from the perspective of reducing information risks,and enhances the authenticity and reliability of the sources of forecast information.Thus improving the quality of analysts’ earnings forecasts.At the same time,ESG rating forces enterprises to improve their internal mechanism,improve corporate governance ability and improve risk control system,increase the predictability of future operating revenue from the perspective of reducing business risks,help analysts evaluate corporate performance based on experience,improve the accuracy of predicting future profits by using current profits,and further promote the improvement of earnings forecast quality.Heterogeneity analysis shows that,under the condition of a bull market and weak industry competition,ESG rating has a more significant effect on improving the quality of analysts’ earnings forecast in companies with a higher proportion of institutional investors’ shares and star analysts’ tracking.The conclusion of this paper proves that ESG rating can reduce the information risk and operational risk of enterprises,optimize the information environment of the capital market,improve the quality of analysts’ earnings forecast,and further promote the efficiency of resource allocation in the capital market.It is suggested that the government should further promote the ESG concept to penetrate the capital market,guide all sectors of society to understand and implement the ESG concept,and improve the ESG information disclosure system as soon as possible,formulate a unified disclosure standard,and solve the problem of the current ESG information disclosure without a basis from the source.It is suggested that enterprises should deeply understand the competitive advantages caused by ESG,actively assume environmental,social and corporate governance responsibilities,and give consideration to economic benefits and social long-term benefits in production and management.It is suggested that rating agencies should continue to improve the methods of information collection,optimize the rating system,and build a localized rating system in line with national conditions.It is suggested that investors fully understand the value of ESG investment concept,consider financial information and non-financial information comprehensively in investment decision,integrate ESG rating to make optimal decision.