Exploring the Impact of First-Time ESG Rating on Stock Price Informativeness and Liquidity : A Comparative Study of Rated and Non-Rated Firms 1n the US Stock Market
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- Master Thesis 
This thesis examines whether being covered by a ESG rating agency translates into moreinformative stock prices in the US stock market, and whether this enhancement of stock price informativeness impacts the stock liquidity of rated firms. By employing price nonsynchronicity as a proxy for stock price informativeness, our study reveals that ESG-rated firms exhibit a 4.3% higher level of price informativeness compared to non-rated firms. Additionally, our findings suggest that rated firms exhibit notable improvements in liquidity, as evidenced by a 3.5% reduction in the relative bid-ask spread and a 16.5% decrease in the Amihud illiquidity ratio. However, our analysis does not provide empirical evidence to suggest that the increase in liquidity is driven by the elevation of stock price informativeness. Overall, our research presents compelling evidence that rating agencies serve as dependable sources of ESG information in the US stock market, but not that this information itself plays a direct role in boosting stock liquidity.