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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Betting Against ESG Sinners: Evidence From Short Selling Around the World
Organization Unit
  • Tsuyoshi Iwata
  • Tomasz Orpiszewski
  • Mark Thompson
  • English
Institution University of Zurich
Series Name SSRN
Number 4818314
ISSN 1556-5068
Number of Pages 23
Date 2024
Abstract Text This paper explores the uncharted territory of short-selling around controversial environmental, social, and governance (ESG) events. Leveraging unique datasets from FIS Global and RepRisk, we investigate shorting behavior and ESG controversies across three prominent equity indices in the United States, Europe, and Japan. In doing so, we present the first empirical evidence on the co-movement of stock prices and short interest in response to ESG news. Employing a combination of event studies and statistical methods common in clinical trials, our research establishes a statistically significant association between adverse ESG events and stock price declines. Surprisingly, despite the frequent price declines surrounding the ESG incidents and the ease of shorting in the major equity markets, our findings reveal an absence of shorting activity around negative events. These findings are particularly striking given the abundance of ESG controversies and the potential for generating profits from long-short and short-only strategies by betting against companies engaged in ESG misconduct.
Free access at DOI
Digital Object Identifier 10.2139/ssrn.4818314
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Keywords ESG news, Short selling, Short interest