This study examines the impact of managerial overconfidence on corporate environmental, social, and governance (ESG) performance. We argue that strong ESG performance mitigates firm risk by functioning as moral capital during adverse events-an insurance-like buffer that protects firms during adverse events and controversies. Overconfident managers, however, tend to hold overly optimistic expectations about firm outcomes and may therefore discount this moral insurance effect, undervaluing ESG initiatives and ultimately exhibiting weaker ESG performance. Using a comprehensive sample of firms from 51 countries over the period 2009-2018, we find a robust negative association between managerial overconfidence and ESG performance. Firms led by overconfident CEOs exhibit weaker environmental policies, poorer social outcomes, and a higher likelihood of governance-related controversies. Our findings remain stable across multiple endogeneity checks, including propensity score matching, generalized method of moments, two-stage least squares, alternative variable constructions, and subsample analyses across institutional and economic groupings. This study contributes to the growing literature at the intersection of behavioral finance and corporate ESG by highlighting the role of managerial psychology-an often-overlooked factor-in shaping nonfinancial performance. Additional analyses indicate that heightened corporate risk-taking serves as a key transmission mechanism through which managerial overconfidence undermines ESG performance. Overall, the study provides novel and policy-relevant insights into the behavioral foundations of corporate sustainability, demonstrating that executive psychology is a critical-yet often overlooked-determinant of firms' ESG outcomes in global settings.

With global financial systems increasingly integrating sustainability objectives, effective strategies for developing sustainable finance literacy among leaders remain underexplored. Drawing on the Elaboration Likelihood Model, we experimentally examined the effectiveness of two interventions based on distinct information-processing routes (i.e., the central and peripheral routes) in improving leaders’ sustainable finance literacy and subsequent green behavior. Using a randomized controlled trial with 184 participants in leadership positions, the results demonstrated that no significant differences between the two routes in influencing post-intervention literacy or behavior. However, supplementary analyses indicated that leaders’ demographic characteristics, including education level, position, and professional experience, were strongly associated with post-intervention outcomes. The findings highlight key demographic factors that may inform the design of sustainable finance literacy programs for business leaders, with practical implications for policymakers and sustainability educators.

Pandemics and global financial crises are rare but highly consequential events that affect societal sentiment, economic conditions, and corporate decision-making. This study examines whether national happiness is associated with corporate financial policies during such extreme shocks. Employing an international panel of firms from 52 countries over the period 2005 to 2020, the study evaluates how variation in societal well-being relates to firms’ financing, investment, and dividend decisions during periods of heightened economic uncertainty. The results indicate that higher levels of national happiness are associated with a greater reliance on debt financing during rare economic shocks, while effects on investment and dividend policies are weaker and less consistent. The findings remain stable across a range of specifications as well as quasi-natural experiments and instrumental variable estimation. Overall, the study suggests that societal well-being is related to corporate financing behaviour during periods of severe economic disruption. By incorporating measures of societal well-being into the study of corporate finance, the study contributes to the behavioural finance literature and provides cross-country evidence on the role of societal sentiment shaping corporate financial strategies during periods of uncertainty.

Greenwashing threatens both consumer trust and the integrity of planetary health initiatives. Transparency in sustainability claims is therefore critical for promoting ecological wellbeing, strengthening food security, and fostering equitable development in the Anthropocene. This paper investigates greenwashing by adapting the Gompers Governance Index methodology to the context of sustainability claims. The focus of our greenwashing index in this case is the sustainability claims made by canned tuna brands in Australia. The index is created from a comprehensive set of criteria for environmental claims, based on the Australian Competition and Consumer Commission (ACCC)’s principles for trustworthy claims. We show that the canned tuna brands form two clusters: one at a very high level of achievement and a second group with notable opportunities to improve on their sustainability communication and transparency. The results also highlight several key issues, most notably a lack of information regarding future sustainability transition plans across most brands. A deeper analysis of the scoring scheme shows that the brands with third-party sustainability certification generally achieved a better alignment with the ACCC principles than other brands. Future iterations of this analysis could incorporate online transparency and third-party verification to provide a more comprehensive assessment. Overall, this study underscores the need for clearer sustainability messaging, greater regulatory enforcement, and improved accountability among brands to ensure consumers can make informed choices.

Investors have a great appetite for their money to positively impact society and the environment. Sustainable and Responsible Investing (SRI) is a means to achieve this impact. However, there is significant cynicism of investment managers. Investors question whether investment managers are genuine about sustainability and whether their investment processes are effective. Into this maelstrom of uncertainty enters the United Nation’s Principles for Responsible Investing (PRI). As an intergovernmental organisation, they champion global sustainability concerns. Their goal is to improve investment practices by signaling to investors which investment managers have quality SRI processes. If the PRI signaling is effective it will attract more flows to the funds managed by PRI signatories. This would motivate investment managers to sign the PRI and maintain their inclusion as signatories. In turn, PRI could influence and improve the SRI processes of these investment managers. This paper applies a longitudinal analysis of the flows to funds managed by PRI signatories. The results raise doubts that PRI is effective at attracting fund flows to their signatories. Fortunately, signaling theory provides insights as to why this might be occurring as well as pathways to improve PRI’s signaling power.

Environmental and climate-based concerns are essential to contemporary leadership scholarship and practice. While organisations are endeavouring to respond, ambiguity persists regarding the effective role of leaders and leadership in driving corporate social responsibility and environmental, social and governance (ESG) agendas. This study aims to investigate the motivations behind leaders’ engagement in sustainability and examine the influence of leaders and leadership on organisational environmental sustainability. By conducting a systematic literature review using the PRISMA protocol, this study identifies 123 studies on the effect of leaders and leadership on organisational environmental sustainability. Thematic analysis highlights the driving factors of leadership styles, leader values and demographics. We further categorise leader and leadership effects on environmental sustainability in employees’ environmental behaviour, environmental measurements, green innovation and environmental management and strategy. Nuanced differences between the roles of leaders and leadership on environmental sustainability are highlighted. Future research trajectories are proposed on leaders’ motivations to pursue environmental sustainability, sustainable leadership development and an increased emphasis on sustainability challenges. This review offers both theoretical and practical implications for academia and practitioners to equip leaders for environmental sustainability initiatives. JEL Classification: D23, M14

Despite the critical role of sustainable finance in achieving a low-carbon economy, how green leaders and organisational culture drive meaningful sustainability change remains unclear. Drawing on social norms, social learning and social identity theories, we examined the effect of green leaders and green organisational culture on employees' green behaviour and organisational environmental sustainability. We analysed survey data from Australian finance industry employees (n = 117) using partial least squares structural equation modelling (PLS-SEM). The results suggest that leaders' environmental knowledge is a key antecedent to green transformational leadership and leaders' green behaviour. Importantly, green transformational leadership and leaders' green behaviour significantly influence green organisational culture, which further drives employees' green behaviour and organisational sustainability. Furthermore, the positive effect of leaders' green behaviour on employees' green behaviour was confirmed. The study highlights the importance of green leaders and green organisational culture for the financial sector. Practical implications are outlined for policymakers.

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This study investigates the relationship between overconfidence and meme stock valuation, drawing on panel data from 28 meme stocks listed from 2019 to 2024. The analysis incorporates key financial indicators, including Tobin’s Q ratio, market capitalization, return on assets, leverage, and volatility. A range of overconfidence proxies is employed, including changes in trading volume, turnover rate, changes in outstanding shares, and alternative measures of excessive trading. We observe a significant positive relationship between overconfidence (as measured by changes in trading volume) and firm valuation, suggesting that investor biases contribute to notable pricing distortions. Leverage has a significant negative relationship with firm valuation. In contrast, market capitalization has a significant positive relationship with firm valuation, implying that meme stock investors respond to both speculative sentiment and traditional firm fundamentals. Robustness checks using alternative proxies reveal that turnover rate and changes in the number of shares are negatively related to valuation. This shows the complex dynamics of meme stocks, where psychological factors intersect with firm-specific indicators. However, results from a dynamic panel model estimated using the Dynamic System Generalized Method of Moments (GMM) show that the turnover rate has a significantly positive relationship with firm valuation. These results offer valuable insights into the pricing behavior of meme stocks, revealing how investor sentiment impacts periodic valuation adjustments in speculative markets.

Greenwashing—where businesses mislead consumers about environmental benefits—is a growing issue in the food industry, particularly in seafood products, where sustainability claims heavily influence purchasing decisions. This study evaluates the sustainability claims on the packaging of canned tuna products in the Australian market, using the Australian Competition and Consumer Commission’s (ACCC) eight principles for trustworthy environmental claims as a benchmark. Drawing on a structured yes/no scoring methodology adapted from the Gompers Governance Index, the research assesses 14 tuna brands across seven of the eight ACCC principles. Findings reveal a significant divide between high-performing brands—such as Johnwest, Coles, Coles Simply, The Stock Merchant, Little Tuna, Walker’s Tuna and Safcol—and those that fall short, particularly in disclosing key information and outlining future sustainability commitments. The study highlights the role of third-party certifications in enhancing claim credibility and identifies key areas where the ACCC principles could be refined to better accommodate industry-specific challenges. By focusing on packaging as the primary medium of consumer engagement, this research contributes to the ongoing discourse on greenwashing, regulatory effectiveness, and the need for improved transparency and accountability in environmental marketing practices.

The global warming crisis is unlikely to abate while the world continues to collectively fund the extraction and burning of fossil fuels. Carbon divestment is urgently needed to ward off the impending climate emergency. Yet responsible investments still only account for a modest share of global assets. We conduct an incentivized artefactual field experiment to test whether framing divestment as a social norm, communicating it by a person with perceived credibility and expertise (a messenger), and highlighting optimistic attributes bolster responsible investment. Our subjects are investment professionals who have significant influence over the allocation of funds. We provide evidence that optimistic framing increases responsible investment. Assuming a comparable effect size, the observed increase would represent a $3.6 trillion USD global shift in asset allocations.

In a recent meta-analysis, most studies on firms’ environmental, social, and governance (ESG) performance were found to have yielded evidence of a positive relationship between superior ESG ratings and financial performance. However, the causal nature of this relationship remains unclear due to endogeneity concerns. Here, we mitigate endogeneity concerns by structuring three natural experiments around significant exogenous shocks to explicitly investigate reverse causality—that is, whether firms with better financial performance have more slack resources available to make subsequent ESG investments. Consistent with slack resources theory, we find that firms with superior financial performance at the time of an exogenous shock subsequently engage more in ESG-related activities. Results are robust to both accounting-based and market-based measures of financial performance across all three exogenous shocks.

Purpose - This study aims to provide a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack of a recognised body of knowledge on this issue. This study, therefore, collates and reviews relevant studies (67 studies) to provide guidance to investors interested in SRI and identify a research agenda for academics desiring to contribute to this area.Design/methodology/approach - This study conducts a systemic literature review employing recognised key words and searching the Web of Science. HistCite is utilised to ensure important cited studies are not missed from the collection. The review was conducted from two perspectives: (1) sources of sustainability information and (2) how the information is used in SRI.Findings - The review identifies five major sources of sustainability information, including corporate reports, ESG ratings, industry affiliation, news and private communication with firms. These sources of information play different roles in the cross section of SRI strategies (i.e. negative and positive screening, active ownership and integration). This study provides guidance on how to use this information in SRI and provides recommendations for future research on how analysts interact with the information, how different informational characteristics impact implementation, ways to improve data quality, improvements to analysis methods and where data use needs to be extended into new strategies. Originality/value- This review contributes to the SRI literature by inventorying studies of an important, yet omitted aspect, namely, sustainability information. This work also enriches the literature on corporate sustainability information by investigating how this information can be used for a specific purpose, namely, SRI. Given the increasing interest in SRI, this review will provide much-needed guidance for a range of practitioners, including investors and regulators.

This study investigates the impact of Covid-19 infections and mobility restriction policies on stock market volatility. We estimate panel data models for seven countries using daily data from February 12, 2020 to April 14, 2021. Our results show that the number of new cases of Covid-19 infections and the introduction of mobility restriction policies plays a crucial role in shaping stock market volatility during the pandemic. We found that new cases of Covid-19 infections and mobility restrictions policies increase stock market jumps, rather than increase continuous volatility. We also find that mobility restriction policies lessen the impact of new Covid-19 cases on stock market volatility.

We test the efficiency of socially responsible investment (SRI) equity mutual funds using linear factor pricing models (LFPM) within the Large $N$ Test of Alpha framework. In this novel alpha testing approach, we analyze a dataset where the number of funds $(N)$ substantially exceeds the time dimension $(T)$, applying a robust test procedure against non-Gaussian distributions and weakly cross-correlated errors. This method circumvents traditional limitations, offering an efficient alternative to alpha testing. Our findings challenge both univariate and multivariate alpha testing models. Crucially, the method finds no significant performance difference between SRI mutual funds and the broader fund universe, debunking the myth of inherent financial compromise in socially responsible investments. This highlights the viability of including SRI funds in portfolios without financial trade-offs.

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