Impact of Non-financial News on Stock Return: Assessing the Impact of ESG on the Danish Stock Market

Abstract

This thesis analyzes the impact of non-financial performance information on corporations' financial performance through a statistical analysis of its effect on stock returns. Our study focuses on the Danish stock exchange from January 1st, 2019, to December 31st, 2022, and examines the short-term effects of different news categories on companies' financial performance. Specifically, we analyze the abnormal and cumulative abnormal returns for individual stocks. Our findings reveal that the influence of financial vs. non-financial news depends on the tone of the announcement, with non-financial news having the most impact when announcements are negative. Additionally, positive stock notifications have the largest impact overall, while ESG announcements are the most influential when considering negative news. We observe no evidence that ESG has become more important over time, as its effect on stock returns remains unchanged. Furthermore, our analysis reveals that governance has the most announcements, typically related to the same large companies. As a result, we conclude that companies have a stronger incentive to avoid ESG scandals than to act responsibly, emphasizing the significance of responsible corporate behavior.