Abstract: This study investigates whether ESG information mitigates the magnitude of post earnings announcement drift (hereafter, PEAD) as an accounting-based anomaly of capital market. It examines the effect of ESG ratings as a proxy for ESG disclosure quality on PEAD in a perspective of information environment. If firms with high ESG ratings provide more information, markets would understand more efficiently the implication of unexpected earnings at the announcement date, which lowers the magnitude of PEAD. The analysis through a univariate test and multiple regressions using KSE-listed firms for 2011-2019 presents the PEAD decrease attributable to ESG information. The results show that the higher ESG performance is, the lower the magnitude of PEAD is. Under being controversial regarding the reliability of ESG information, this study is valuable to provide the evidence of usefulness of ESG information in reduction of accounting-based market anomaly.
Keyword: ESG information, Mispricing, PEAD, Non-financial report, Market efficiency