This paper investigates how firms' ESG ratings influence their ownership by institutional investors and their cost of capital. Using a regression discontinuity design, I find that everything else being equal, among firms with high MSCI ESG scores, those with better ESG labels attract higher ownership by ESG institutional investors compared to similar firms with worse ESG labels. Conversely, among firms with low MSCI ESG scores, those with worse ESG labels have higher ownership by ESG institutional investors compared to similar firms with better ESG labels. In both cases, higher ownership by ESG institutional investors lowers the firms' perception of their cost of capital, without affecting their implied cost of capital. I argue that this opposite behavior of ESG institutional investors reflect distinct responsible investment strategies that they pursue.

We study the effect of a firm's new information disclosure on the information asymmetry between its informed and uninformed investors and its liquidity. To do this, we employ advanced natural language processing (NLP) methods to introduce a novel measure of firms' 10-K filing predictability that quantifies the amount of new information in these reports. Our findings show that more new information is associated with higher bid-ask spreads and lower trading volumes, indicating increased information asymmetry and reduced liquidity, respectively. Notably, institutional ownership moderates these effects, suggesting that sophisticated investors can mitigate the adverse consequences of disclosure unpredictability. An event study analysis further reveals that more new information triggers increased trading activity and abnormal returns immediately after disclosure, though these effects are short-lived.

This paper investigates the optimal precision of a firm's public information disclosure when its payoff comprises financial and non-financial components, and investors have heterogeneous preferences regarding these two components. Investors acquire private signals about both payoff elements, and their trading activities generate feedback that informs the firm's managerial investment decisions. We analyze how the precision of non-financial information disclosure impacts investors' incentives to gather private information, market liquidity, and the informativeness of stock prices.