The Effect of Sustainability Reporting on ESG Ratings
by Arthur Luetkemeyer
Abstract
Over the past decade the concept of Environmental, Social, and Governance (ESG) investing has emerged to aid investors to maximize return on investments while simultaneously supporting environmentally and socially friendly methods of production and operation. In this paper I investigate the effect of the quality of sustainability reporting on ESG ratings. I utilize a sample of 100 chemical companies with ESG ratings and sustainability disclosure indexes over a 14-year time period (2007-2020) to analyze the short- and long run effects of sustainability reporting on ESG ratings. Using OLS my regression results suggest that better overall ESG disclosure as well as individual E, S, and G disclosure leads to worse ESG ratings in both the short run and the long run.
Professor Christopher Timmins, Faculty Advisor
Professor Grace Kim, Faculty Advisor
JEL Codes: M14, M40
Multiples Valuation and Abnormal Returns
By Joon Sang Yoon
I investigate whether three commonly used valuation multiples—the Price-to-Earnings Ratio, the EV-to-EBITDA multiple, and the EV-to-Sales multiple—can be used to identify mispriced securities. I find that multiples are successful in identifying mispricing in both the equal and value weighted portfolios relative to the One-Factor CAPM. I further find, after controlling for size and value effects, that the bulk of the abnormal returns are concentrated in smaller firms. Moreover, the Sales multiple seems to outperform the other two multiples in the equal weighted design. In the value weighted design, however, the P/E ratio outperforms the others.
Advisor: Per Olsson, Michelle Connolly | JEL Codes: G12, G14, M4 | Tagged: Equity Valuation, Long-run Abnormal Returns, Market Efficiency, Multiples Valuation
