ESG Factors and Asset Pricing Efficiency from the Perspective of Information Asymmetry:A Narrative Review
Main Article Content
Keywords
ESG disclosure, ESG rating adjustment, asset pricing, CAPM model, information asymmetry
Abstract
This narrative review systematically investigates the connection between the aspects of ESG and asset pricing efficiency with regard to the view of information asymmetry. As the analysis reveals, ESG has two impacts on prices: a signaling channel, whereby credible disclosures such as ratings and certifications address the information asymmetry in the stock market, and a trust channel, whereby the investors, because of their value congruence, reduce the risks associated with transactions. A central contribution is the development of a contingency framework demonstrating that the relative efficacy of these pathways depends on the information environment—signaling dominates in high-asymmetry contexts, while trust gains prominence as information becomes more abundant. The analysis further reveals that the moderating role of information asymmetry is shaped by heterogeneous conditions at the firm, market, and institutional levels. For instance, ESG signals exert stronger pricing effects in opaque environments, while trust mechanisms dominate in contexts with abundant information. The review constructs a contingency, which incorporates signaling and trust pathways. It concludes conflicting results in the literature and provides viable information to investors and regulators in improving the efficiency of the markets through prescribing a combination of measures that can be adopted in both opaque and transparent markets.
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