Not so myopic: Investors lowering short-term growth expectations under high industry ESG-sales-related dynamism and predictability

Past studies on the effects of environmental, social, and governance (ESG) scores firm performance have found mixed support. To further unpack these findings, we focus industry-level dynamism predictability ESG sales investor expectations prospects growth. Dynamism (predictability) is based standard error (R-squared) industry ratings regressed sales. Taking an investor’s perspective, a forward-looking measure, specifically, implied volatility in firm’s 365-day at-the-money call options. Our findings show that although ESG-sales lower volatility, higher firm-level rating mitigates decline under increasing dynamism. The investors expect short-term growth potential firms with experimentation leveraging to increase (i.e., dynamism) only their discounts for scores. dynamics among form are added considerations studying relationships.