We test the performance of two ESG score-driven quantitative signals on a large, multi-national cross section of European stock returns. In particular, we ask whether in the cross-section of stock returns, the cost of equity capital to firms is more strongly affected by the (upward) “slope” (identified as momentum over a period of time) of their ESG scores or by their “stability” (identified as the volatility of the scores over a period of time), measured around a given slope. We find that 1-month, short term ESG momentum is priced in the cross-section of stock returns and that it lowers the ex-ante cost of capital (at the same time causing realized ex-post average abnormal returns). ESG momentum may represent a novel, priced systematic risk factor, even though such a finding is not robust to changing the definition of the scores or to increasing the estimation period of ESG momentum. There is equally strong evidence that a ESG spread strategy that buys (sells) low (high) ESG score volatility stocks leads to a significant alpha and alters the ex-ante cost of capital, even though as a characteristic volatility is not significantly priced in the cross-section. Both quantitative ESG signals lead to portfolio sorts and long-short strategies that increase the speed of improvement of the aggregat sustainability profile of the resulting portfolios with no (or with negative, risk-adjusted) costs in terms of average ESG scores or their stability.

The right to speak and ask questions at annual general meetings (AGMs) represents

one of the few avenues for shareholders to interact directly and publicly with the firm’s

management. This paper examines the tone and content of shareholder communication

during AGMs with a focus on environmental, social, and governance (ESG) issues.

Using AGM transcripts of U.S. companies between 2007 and 2021, we find that both

institutional and non-institutional shareholders are vocal about sustainability aspects.

Shareholders assign varying degrees of importance to different ESG issues based on

their individual relationship with the firm. Further, shareholders who are dissatisfied

with a company’s sustainability record use the AGM to express their concerns by

speaking in a negative tone about the sustainability issues at hand. The findings

suggest that the tone of shareholder communication at AGMs may serve as an “early

warning indicator” for management, highlighting ESG areas that require improvement.

We investigate the relationship between internal corporate governance and market performance across multiple countries, utilizing a comprehensive dataset comprising 77,440 firm observations from 15 European Union countries over the period 2002-2018. Specifically, we examine the impact of board characteristics, including size, independence, gender diversity, CEO duality, and classified boards, on market performance. Our findings reveal that board size consistently emerges as a significant predictor of market returns. Smaller boards tend to be associated with better market performance. Additionally, CEO duality exhibits a negative relationship with market performance across countries. Interestingly, we observe a positive association between staggered boards and performance and find no significant relationship between board independence and market performance in Europe. Upon analyzing the data at the country level, we identify that the links between board structure and performance vary by country. These divergent findings indicate that there is no universally applicable corporate governance solution that can be recommended for companies throughout Europe.