Assessing the Impact of ESG Performance on Financing Costs: An Analysis of Nordic Firms
(2024) BUSN79 20241Department of Business Administration
- Abstract
- Title: Assessing the Impact of ESG Performance on Financing Costs: An Analysis of Nordic Firms
Seminar date: 31 May 2024
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Julius Honkala & Carl Sawelin
Advisor: Elias Bengtsson
Key words: ESG, cost of capital, Nordics, Socially responsible investing, financial theory.
Purpose: The motivation behind this study is to explore the relationship between ESG performance and the cost of capital in corporate finance. It aims to determine if firms with higher ESG scores have lower financing costs in the Nordics, filling a gap in sustainable finance literature. The study's contribution is to provide insights that inform investors, policymakers, and
companies about the potential... (More) - Title: Assessing the Impact of ESG Performance on Financing Costs: An Analysis of Nordic Firms
Seminar date: 31 May 2024
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Julius Honkala & Carl Sawelin
Advisor: Elias Bengtsson
Key words: ESG, cost of capital, Nordics, Socially responsible investing, financial theory.
Purpose: The motivation behind this study is to explore the relationship between ESG performance and the cost of capital in corporate finance. It aims to determine if firms with higher ESG scores have lower financing costs in the Nordics, filling a gap in sustainable finance literature. The study's contribution is to provide insights that inform investors, policymakers, and
companies about the potential financial impacts of integrating sustainability into strategic
decisions.
Methodology: Panel data regression methods; fixed effect regression method as the main
modelling choice.
Theoretical perspectives: The fundamental financial theories that form the theoretical
framework and build the analysis on are: agency theory, stewardship theory, stakeholder theory, legitimacy theory, and signaling theory.
Empirical foundation: The study consists of 2308 firm-year observations from 570 publicly
listed Nordic firms from 2017 to 2022.
Conclusions: We conclude that the ESG score and cost of capital have a statistically significant
but economically marginal relationship in the Nordic region. However, contrary to the
predominant findings of the empirical literature reviewed in this study, this relationship is
positive rather than negative. Additionally, the hypothesized key drivers—namely firm size,
industry, and governance effects—did not demonstrate the expected influence. In fact, the findings and analysis suggest that these factors are either statistically insignificant or opposed to the proposed hypotheses. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9165953
- author
- Honkala, Julius LU and Sawelin, Carl LU
- supervisor
- organization
- course
- BUSN79 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- ESG, cost of capital, Nordics, Socially responsible investing, financial theory
- language
- English
- id
- 9165953
- date added to LUP
- 2024-06-22 23:49:45
- date last changed
- 2024-06-22 23:49:45
@misc{9165953, abstract = {{Title: Assessing the Impact of ESG Performance on Financing Costs: An Analysis of Nordic Firms Seminar date: 31 May 2024 Course: BUSN79 - Degree Project in Accounting and Finance Authors: Julius Honkala & Carl Sawelin Advisor: Elias Bengtsson Key words: ESG, cost of capital, Nordics, Socially responsible investing, financial theory. Purpose: The motivation behind this study is to explore the relationship between ESG performance and the cost of capital in corporate finance. It aims to determine if firms with higher ESG scores have lower financing costs in the Nordics, filling a gap in sustainable finance literature. The study's contribution is to provide insights that inform investors, policymakers, and companies about the potential financial impacts of integrating sustainability into strategic decisions. Methodology: Panel data regression methods; fixed effect regression method as the main modelling choice. Theoretical perspectives: The fundamental financial theories that form the theoretical framework and build the analysis on are: agency theory, stewardship theory, stakeholder theory, legitimacy theory, and signaling theory. Empirical foundation: The study consists of 2308 firm-year observations from 570 publicly listed Nordic firms from 2017 to 2022. Conclusions: We conclude that the ESG score and cost of capital have a statistically significant but economically marginal relationship in the Nordic region. However, contrary to the predominant findings of the empirical literature reviewed in this study, this relationship is positive rather than negative. Additionally, the hypothesized key drivers—namely firm size, industry, and governance effects—did not demonstrate the expected influence. In fact, the findings and analysis suggest that these factors are either statistically insignificant or opposed to the proposed hypotheses.}}, author = {{Honkala, Julius and Sawelin, Carl}}, language = {{eng}}, note = {{Student Paper}}, title = {{Assessing the Impact of ESG Performance on Financing Costs: An Analysis of Nordic Firms}}, year = {{2024}}, }