Do high-ability managers choose ESG projects that create shareholder value - Aaron Yoon - ASWQ V3I2 - March 2025

This study explores whether high-ability managers can allocate resources to environmental, social, and governance (ESG) initiatives in ways that enhance shareholder value. Using employee opinions from Glassdoor to assess CEO ability, researchers created portfolios based on ESG investment and managerial quality. They found that firms with both high ESG performance and high-ability managers generated approximately 4.7% annualized alpha, with a 7% return gap between firms with low and high combinations of ESG and managerial ability. The study also reveals that ESG scores and employee satisfaction are largely uncorrelated, suggesting firms‚ ESG disclosures don't reflect employee sentiment. Stronger results were found when focusing on current and full-time employees. Multiple robustness tests confirmed the consistency of findings across various models. Overall, the paper concludes that high-ability managers who have employee support and performance-linked compensation are more likely to implement ESG strategies that create value, highlighting the importance of leadership quality in successful ESG investment.