Summary:
Environmental, Social, and Governance (ESG) has become a critical indicator for assessing corporate sustainable development ability. Investors and regulators increasingly rely on third-party information channels, such as media coverage and ESG ratings, to compensate for deficiencies in corporate ESG disclosure. Compared with ESG ratings, which often suffer from time lags and oversimplification, media reports are more timely and richer in content. However, they also inevitably contain subjective judgments and emotional tones introduced by journalists and editors. This dual nature grants ESG news sentiment both an “information transmission” and an “emotional contagion” function in capital markets, making its impact on corporate investment decisions and underlying mechanisms a meaningful academic issue. Drawing on corporate governance theory and behavioral finance theory, this study develops a dual-path “information-emotion” analytical framework to examine the effect of ESG news sentiment on corporate inefficient investment. From the perspective of corporate governance, information asymmetry and agency problems are key drivers of inefficient investment; from the perspective of behavioral finance, investor and managerial sentiment may also distort investment decisions. Based on these theoretical underpinnings, two pathways are proposed: (1) the information effect, whereby ESG news sentiment mitigates information asymmetry, improves financing conditions, and strengthens monitoring mechanisms, thereby restraining inefficient investment; and (2) the emotion effect, whereby the timeliness and narrative features of ESG news amplify market optimism and managerial cognitive bias, leading to investment expansion and intensified inefficiency. While these two effects may theoretically offset each other, in practice the emotional effect tends to dominate due to its immediacy, contagion, amplification, and accumulation. To test the theoretical framework, this study uses a sample of China Shanghai and Shenzhen A-share listed firms from 2013 to 2023. ESG news sentiment scores are obtained from the Datago ESG News Quantitative Sentiment Database, and combined with financial data and indicators of inefficient investment for empirical analysis. The findings are as follows: (1) Overall, ESG news sentiment is significantly and positively associated with corporate inefficient investment, indicating that more favorable sentiment intensifies inefficient investment. This result holds under various robustness checks. (2) Mechanism analysis reveals that the information effect reduces inefficient investment by alleviating information asymmetry, whereas the emotional effect exacerbates inefficiency by stimulating investor sentiment and managerial optimism. Specifically, ESG news sentiment does not induce managerial opportunistic behavior but primarily operates through cognitive bias. (3) Sub-dimension analysis shows that governance-related news sentiment has the strongest effect, highlighting the close linkage between governance issues and investment efficiency. (4) The intensifying effect of ESG news sentiment on inefficient investment is more pronounced in non-state-owned enterprises, capital-intensive industries, firms with weaker organizational inertia, managers with higher risk preference, and in environments with weaker market constraints (e.g., lower analyst coverage and reduced short-selling pressure). This study makes three key contributions to the literature. First, at the theoretical level, it innovatively incorporates ESG news sentiment into the framework of inefficient investment research, proposing and validating the dual-path “information-emotion” mechanism. This approach advances beyond prior studies that treated ESG as a uniformly positive factor and uncovers its “double-edged sword” role in capital markets. Second, from a research perspective, this study differentiates itself from broader media sentiment research by focusing specifically on ESG-related news, a subset of soft information, and by distinguishing between the mechanisms of information transmission and emotional contagion, In doing so, it provides new empirical evidence for understanding the role of media sentiment in investment decision-making. Third, at the practical level, the findings offer implications for regulators, firms, and investors. Regulators should promote standardized ESG disclosure, enhance media oversight, and establish sentiment governance mechanisms to prevent emotion-driven investment distortions; firms should avoid catering to short-term sentiment, strengthen governance capacity, and pursue rational decision-making; investors should remain vigilant against amplified sentiment effects and make prudent investment decisions based on fundamentals to avoid misjudging firm value amid market fluctuations.
何青, 庄朋涛, 夏琴, 琚望静. ESG新闻舆情如何影响企业 非效率投资行为——基于信息和情绪双重视角[J]. 金融研究, 2025, 545(11): 96-114.
HE Qing, ZHUANG Pengtao, XIA Qin, JU Wangjing. How Does ESG News Sentiment Affect Corporate Inefficient Investment Behavior？ A Dual Perspective of Information and Sentiment. Journal of Financial Research, 2025, 545(11): 96-114.
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