The role of environmental, social, and governance rating on corporate debt structure

Panagiotis Asimakopoulos · Stylianos Asimakopoulos · Xinyu Li

123 citations0/0 files storedJournal of Corporate Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Corporate Social Responsibility Reporting Credit Risk and Financial Regulations

Abstract

This paper examines the impact of Environmental, Social, and Governance (ESG) rating on a firm’s debt structure. We find that optimal (market and book) leverage ratios and information asymmetry are reduced when firms become ESG rated. More importantly, ESG rated firms redistribute their financing sources from public debt (bonds issuing) to private debt (bank loans). These results are attributed to the incentive of ESG rated firms to avoid debt-overhang and underinvestment issues and to the fact that the ESG rating conveys valuable information to lenders leading to better access towards more internal sources of financing, such as bank loans over debt issuing. We further find that the substitution effect is more pronounced for firms with high financial pressure, low growth opportunities and specialized assets. Finally, these results remain valid under various robustness and endogeneity tests.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 123 citations exist upstream.

References

1995Another look at the instrumental variable estimation of error-components models 1984Corporate financing and investment decisions when firms have information that investors do not have 1958The Cost of Capital, Corporation Finance and the Theory of Investment 1977Determinants of corporate borrowing 2008The cost of capital, corporation finance and the theory of investment 1992Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt 2013Corporate social responsibility and access to finance 1977Informational Asymmetries, Financial Structure, and Financial Intermediation

Cited by

2024ESG rating results and corporate total factor productivity 2024Environmental, social, and governance performance and corporate debt maturity in China 2024Impact of environmental, social, and governance rating disagreement on real earnings management in Chinese listed companies 2025Corporate innovation and ESG performance: The role of government subsidies 2025“ESG disclosure and its impact on firm leverage: Moderating role of quality of financial reporting and financial constraints”

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.