Examining the Impact of ESG News Sentiment on Corporate Performance: A Comprehensive Analysis by News Topic and Industry

Abstract

This study examines the relationship between ESG news sentiment and corporate performance through the lens of stakeholder theory. While ESG ratings face significant limitations, including measurement inconsistencies and time lags, news sentiment analysis offers insights into internal and external stakeholder responses to ESG activities. Using news articles for Korean listed companies, we investigate ESG news sentiment across different dimensions and topics defined by the sustainability accounting standards board (SASB) while considering industry context. The results reveal a positive relationship between overall ESG news sentiment and corporate performance. In the dimensional analysis, social and governance news sentiment demonstrate significant positive effects, while environmental sentiment shows no significant association. Analysis of SASB-defined topics reveals that certain issues have stronger associations with performance, with effects varying across industries. Our findings contribute to addressing a research gap in sustainable finance literature by revealing how stakeholder responses vary across different ESG dimensions and material topics, while providing practical implications for corporate strategy, investment decisions, and policymaking.