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
Abstract
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.