부정적인 ESG 뉴스와 원가의 비대칭성

This study investigates whether negative ESG news affects managers’ strategic cost decisions and how the relationship is affected by managers’ incentives depending on firm’s operating performance, industry types and competitive position within the industry. By analyzing how strategic cost management is affected by negative ESG news in the media from 2012 to 2019, we find that cost asymmetry increases with negative ESG news. When tarnished ESG reputation prevails in the market triggered by negative ESG news, managers of these firms are reluctant to downsize costs even when they predict a decrease in market demand because their cost adjustment decision can incur greater implicit adjustment costs, including loss of employee morale, increased turnover among remaining employees after layoffs, and compromised brand image. This relationship is more pronounced for firms with very low operating performance, firms within non-consumer goods industries and following firms within each industry. The results imply that managers’ cost adjustment decision reacting to negative ESG news can be affected by managers’ incentives depending on operating performance and industry characteristics. This study contributes to the literature by providing the evidence that ESG risk can indirectly affect corporate earnings through cost management mechanism.