TY - JOUR
T1 - The Effect of environmental, social, and governance performance factors on firms' cost of debt
T2 - international evidence
AU - Houqe, Muhammad Nurul
AU - Ahmed, Kamran
AU - Richardson, Grant
PY - 2020/9
Y1 - 2020/9
N2 - This study examines the effect of environmental, social, and governance (ESG) performance on firms’ cost of debt (COD). Based on a sample of 18,950 firm-year observations from 41 countries over the period of 2008–2015, we find a significant negative association between aggregate ESG performance and firms’ COD. We also observe a significant negative association between the individual ESG performance factors (E, S, and G) and firms’ COD. In addition, the negative association between aggregate/individual ESG performance and firms’ COD is economically significant, ranging from 16.93% to 21.20% of median COD values. Finally, disclosure of ESG performance, stakeholder orientation, investor protection, control of corruption, and social progress have pronounced effects on the negative association between ESG performance and firms’ COD. Taken together, our results suggest that ESG performance has a significant negative effect on firms’ COD from an international perspective.
AB - This study examines the effect of environmental, social, and governance (ESG) performance on firms’ cost of debt (COD). Based on a sample of 18,950 firm-year observations from 41 countries over the period of 2008–2015, we find a significant negative association between aggregate ESG performance and firms’ COD. We also observe a significant negative association between the individual ESG performance factors (E, S, and G) and firms’ COD. In addition, the negative association between aggregate/individual ESG performance and firms’ COD is economically significant, ranging from 16.93% to 21.20% of median COD values. Finally, disclosure of ESG performance, stakeholder orientation, investor protection, control of corruption, and social progress have pronounced effects on the negative association between ESG performance and firms’ COD. Taken together, our results suggest that ESG performance has a significant negative effect on firms’ COD from an international perspective.
KW - Environment
KW - social and governance performance
KW - cost of debt
UR - http://www.scopus.com/inward/record.url?scp=85092769705&partnerID=8YFLogxK
U2 - 10.1142/S1094406020500146
DO - 10.1142/S1094406020500146
M3 - Article
AN - SCOPUS:85092769705
SN - 1094-4060
VL - 55
SP - 1
EP - 30
JO - The International Journal of Accounting
JF - The International Journal of Accounting
IS - 3
M1 - 2050014
ER -