Do sustainability disclosure mechanisms reduce market myopia? Evidence from European sustainability companies

Autor: LUIS MUGA, Cristina Del Rio, Francisco-José López-Arceiz
Přispěvatelé: Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa. Institute for Advanced Research in Business and Economics - INARBE, Universidad Pública de Navarra / Nafarroako Unibertsitate Publikoa
Rok vydání: 2023
Předmět:
Zdroj: International Review of Financial Analysis. 87:102600
ISSN: 1057-5219
DOI: 10.1016/j.irfa.2023.102600
Popis: Market myopia is a behavioural bias that causes investors to overvalue short-term earnings and undervalue long-term profits. This anomaly should not be compatible with sustainability disclosure mechanisms, the set of tools which firms use for reporting on their sustainable practices, and which contribute towards long-term performance improvements. Our aim is to study whether market myopia, as a symptom of market inefficiency, decreases with the implementation of sustainability disclosure mechanisms. We test for the presence of market myopia in a sample of firms listed on the S&P Europe 350 Index. For this purpose, we propose to use an adaptation of the valuation model for residual income under linear information dynamics developed by Felthan and Ohlson. Using the rating provided by RobecoSAM Sustainability Yearbook, we find market myopia to be less prevalent in companies classified as high sustainability reporters. An association is also found between persistent enforcement of sustainability disclosure mechanisms and a reduction of the market myopia effect. Grant PID2019- 104304GB-I00 funded by MCIN/AEI/ 10.13039/501100011033 and grant TED2021-131216B-I00 funded by MCIN/AEI/10.130 39/501100011033 and European Union “NextGenerationEU”/PRTR. Open access funding provided by Universidad Pública de Navarra.
Databáze: OpenAIRE
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