ESG as Credibility Capital: Earnings Announcements and Market Reactions

Sammanfattning

This thesis tests whether ESG performance influences stock market reactions to earnings announcements among Swedish listed firms from 2016 to 2025. The analysis distinguishes a mispricing channel, under which ESG captures underappreciated firm quality revealed through earnings surprises, from a credibility channel, under which high ESG firms produce more reliable earnings signals. The earnings response coefficient (ERC) rises significantly with ESG scores, with a one-standard-deviation increase raising the implied ERC by approximately 38 percent. The effect survives controls for analyst in the immediate window, strengthens after excluding the COVID-19 years, and disappears in a pre-announcement placebo window. The mispricing channel finds no support: high ESG firms do not earn higher abnormal returns, and analysts do not systematically underestimate their earnings. In a market with high institutional ESG integration, ESG functions as credibility capital rather than as underappreciated firm quality.