Heidi Maryssa Mohd Sabri, Ahmad Fawwaz Mohd Nasarudin^♣ and Azniza Hartini Azrai Azaimi Ambrose
Department of Finance, Faculty of Economics and Management Sciences, International Islamic University Malaysia, Kuala Lumpur, Malaysia

The fight for sustainability in finance is a conundrum that divides opinions among market participants. Given its potential hefty increase in the cost of operation, there is a perception that a sustainable investment could slow down financial returns. This leads one to wonder how market participants will respond to the sustainable-related announcements. To address the issue, this study investigated the sensitivity of investors towards the Environmental, Social, and Governance (ESG) movement in Malaysia by examining the announcement effect of inclusion or exclusion of a firm from the FTSE4Good Bursa Malaysia Index by employing an event study analysis. Our findings indicated that investors are sensitive to both announcements, but stock price adjusts faster towards deletion announcements compared to inclusion announcements from the index. This study enriches the literature on semi-strong market efficiency although slight evidence suggests possible overreaction and momentum trading. The study also showed that Malaysian investors are sensitive to ESG announcements, as the inclusion (exclusion) of stock is met with positive (negative) effects on returns.

Keywords: Announcement Effect, ESG Stocks, FTSE4Good, Efficient Market

^♣Corresponding Author: Ahmad Fawwaz Mohd Nasarudin, Department of Finance, Faculty of Economics and Management Sciences, International Islamic University Malaysia,50728 Kuala Lumpur, Malaysia; Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Tel: +603-6421 4767