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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | The Effect of Media Coverage and ESG Disclosure on the Buying Behavior of Retail Investors |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 80 |
| Date | 2021 |
| Abstract Text | The demand for sustainable investments has increased substantially in recent years. More and more people are trying to integrate sustaina- bility not only into everyday habits, but also into their investments. The approach of socially responsible investments has existed for a long time. But the noticeable increase in environ- mental disasters has led to a generally growing awareness of climate change. This is one of the main reasons why sustainable investments are becoming more and more popular. In the meantime, different investment strategies have emerged that allow most investors to align their personal values with financial investments. Among those the ESG concept is gaining importance. This is an approach which is based on a more comprehensive understanding of the current situation of a company or its future positioning with respect to the non-financial aspects of environmental, social and governance (ESG) related factors. Various rating agencies publish a so-called ESG score, which is designed to make ESG-related efforts by companies more transparent, easier accessible and comparable. However, the lack of sustainability standards leads to a rather low correlation between the scores of the individual providers. Different interpretations of sustainability lead to the use of different attributes or different weightings for the same attributes in the calculation of the ESG score. This is currently a major limitation. The EU Action Plan is a possible solution to this problem. Sustainable investments were long viewed to systematically underperform conventional investments. Although the majority of studies have found no significant underperformance, this misconception is still widespread. This leads to the next intensely debated assumption, the rational investor who seeks to optimize financial return and risk exclusively. Such rational investors would only make sustainable investments if they had an identical or even better risk-return profile than conventional investments. Since, as mentioned above, the demand for sustainable investments has risen dramatically in recent years, which casts doubt on the assumption of rational investors and/or the underperformance of sustainable investments. An increasing amount of research shows the influence of psychological factors on investor behavior. In addition to the previously accepted monetary motives, intrinsic or reputational motives also influence the decision-making process. Currently, there is no uniformly applied sustainability standard. In addition, sustainable investments are made based on a wide variety of motives. This makes it even more important to learn more about the kind of information that is important to investors in their decision-making process. Media play a central role in generating new information. The influence of media on different aspects of stock markets has been analyzed in several studies. Capelle-Blancard and Petit (2019) and Kruger (2015) both found that ESG-related news influences stock prices. The effect tends to be stronger for negative ESG events than for positive ones, but overall rather low. Moss, Naughton and Wang (2020) found that ESG-related news does not lead to economically noticeable portfolio adjustments for retail investors. These findings challenge the importance of ESG information for retail investors. By framing information in a targeted way, investors can be influenced in their decision-making process. Døskeland and Pedersen (2016) investigated the motives of sustainable investors using two frames. The wealth frame, which shows investors the financial perspectives of investment opportunities, increases both interest in additional information and influences purchasing behavior more than with the moral frame. When providing information, possible biases based on psychological factors should be taken into account. One possible bias is the confirmation bias. This means that people prefer information that is consistent with their prior beliefs. Based on these considerations, the first hypothesis was derived. |
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