An Analysis of the Anchoring Effect in ESG Disclosure Models and Investor Decision-Making

Abstract

The goal of this research is to understand how variations in ESG information disclosure methods affect the development and reinforcement of an investor’s anchoring effect when making investment decisions. The research incorporates elements of theoretical analysis and event study methods to systematically study how the characteristics of information disclosures impact cognitive biases in investors. Based upon analysis, it has been found that due to the differences in the level of transparency, consistency and comparability of various types of information disclosures, there will be significant differences in the creation and stability of anchor points which can then lead to instances of misallocation and/or overreaction to ESG information; and thus, optimising the structure of these types of information disclosures and providing behavioural guidance to the cognitive processes of the investor community will be of paramount importance in minimizing anchoring bias and improving market efficiency.