Media coverage of environment, social and governance (ESG) issues provides useful information for analysts as corporate social irresponsibility events potentially influence firm performance and risk. Our study explores whether and how analysts respond to media coverage of corporate social irresponsibility by examining its relationship with analyst coverage and forecasts. We find that the level of analyst coverage is negatively associated with a firm’s ESG incidents covered by the media. This association is more pronounced for firms with high business risk, high information opacity, and more intense industrial product market competition. We also find a positive association between media-covered ESG incidents and analyst forecast error and dispersion, suggesting that analysts might fail to incorporate the ESG risk exposures into their forecasts in an appropriate manner. Overall, our results suggest that corporate social irresponsibility undermines the role analysts play as information intermediaries for investors in the stock market. 

Keywords: corporate social irresponsibility; media coverage; analyst following; analyst forecast error; analyst forecast dispersion

JEL classification codes: G14; M14; M41​