Firm ESG reputation risk and debt choice

David Newton · Steven R. G. Ongena · Ru Xie · Binru Zhao

46 citations0/0 files storedEuropean Financial Management

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Corporate Social Responsibility Reporting Corporate Finance and Governance Corporate Identity and Reputation

Abstract

Abstract Using a novel sample covering 3783 US public firms from 2007 to 2020, we examine how negative media coverage of firm‐level environmental, social, and governance (ESG) practices affects a firm's debt choice. We find that firms with higher ESG reputation risk rely more on public bond than bank loan. The social and governance components, in particular, matter. Moreover, firms that receive more negative news coverage display a higher propensity to issue new bonds as opposed to securing new bank debt. Overall, our study presents empirical evidence on the relation between firm ESG reputation risk and debt financing.

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References

1984Financial Intermediation and Delegated Monitoring 1995The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications 1990WHAT'S IN A NAME? REPUTATION BUILDING AND CORPORATE STRATEGY.1992Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt 2013Corporate social responsibility and access to finance 2001Shareholder value, stakeholder management, and social issues: what's the bottom line?1991Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt 2008The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis

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2025Finance for a Greener future: Evolving the financial sector for ESG and sustainable corporate debt management

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