The Price of Environmental, Social and Governance Practices Disclosure : An Experiment with Professional Private Equity Investors

This paper sheds light on the impact environmental, social and governance (ESG) corporate practices disclosure have on equity financing. We present a unique framed field experiment in which professional private equity investors competed in closed auctions to acquire fictive firms. We hence observe that corporate non-financial (ESG) performance disclosure impacts firm valuation and investment decision and we quantify to which extent. Main result is an asymmetric effect, investors reacting more to bad ESG practices disclosure than to good ESG ones. Our findings are discussed in terms of practical implications for both investors and firm managers