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LUND UNIVERSITY LIBRARIES

ESG Disclosure and the Relevance for Public vs. Private Lenders

Viétor, Caren LU and Larsson, David LU (2023) BUSN79 20231
Department of Business Administration
Abstract
Purpose and research question: The purpose of the study is to examine the effect ESG disclosure exerts on a firm’s propensity towards public or private debt.
Methodology: For the panel data, pooled OLS and fixed effects models are applied. A quadratic term is introduced to test for non-linearity between bond debt ratios and ESG disclosure scores. An instrumental variable approach and a sharp regression discontinuity design are employed to test for endogeneity. Lastly, the sensitivity of the results are tested with various robustness tests.
Theoretical perspectives: The study has its foundation in the theoretical frameworks regarding capital structure choice. Especially important is the concept of information asymmetry, which is used to... (More)
Purpose and research question: The purpose of the study is to examine the effect ESG disclosure exerts on a firm’s propensity towards public or private debt.
Methodology: For the panel data, pooled OLS and fixed effects models are applied. A quadratic term is introduced to test for non-linearity between bond debt ratios and ESG disclosure scores. An instrumental variable approach and a sharp regression discontinuity design are employed to test for endogeneity. Lastly, the sensitivity of the results are tested with various robustness tests.
Theoretical perspectives: The study has its foundation in the theoretical frameworks regarding capital structure choice. Especially important is the concept of information asymmetry, which is used to arrive at the hypotheses and explain our results.
Empirical foundation: The study uses a sample of 8.606 firm-year observations on 662 individual firms based in 15 EU countries for the fiscal years 2009 to 2021.
Conclusions: Our findings demonstrate that increased ESG disclosure is associated with a higher bond debt ratio, indicating a shift towards public debt. Moreover, the positive relationship between ESG disclosure and bond debt is non-linear and applies primarily to firms with higher ESG disclosure scores. We further establish a causal link between ESG disclosure and firm bond ratios by demonstrating the distinctive impact of a regulatory change in the EU on this relationship. (Less)
Please use this url to cite or link to this publication:
author
Viétor, Caren LU and Larsson, David LU
supervisor
organization
alternative title
The effect of ESG Disclosures on a firm’s debt source choice in the EU market between 2009 and 2021
course
BUSN79 20231
year
type
H1 - Master's Degree (One Year)
subject
keywords
ESG Disclosure, Debt Source Choice, Information Asymmetry, Capital Debt Structure, Regression Discontinuity Design
language
English
id
9118727
date added to LUP
2023-09-12 14:35:24
date last changed
2023-09-12 14:35:24
@misc{9118727,
  abstract     = {{Purpose and research question: The purpose of the study is to examine the effect ESG disclosure exerts on a firm’s propensity towards public or private debt.
Methodology: For the panel data, pooled OLS and fixed effects models are applied. A quadratic term is introduced to test for non-linearity between bond debt ratios and ESG disclosure scores. An instrumental variable approach and a sharp regression discontinuity design are employed to test for endogeneity. Lastly, the sensitivity of the results are tested with various robustness tests.
Theoretical perspectives: The study has its foundation in the theoretical frameworks regarding capital structure choice. Especially important is the concept of information asymmetry, which is used to arrive at the hypotheses and explain our results.
Empirical foundation: The study uses a sample of 8.606 firm-year observations on 662 individual firms based in 15 EU countries for the fiscal years 2009 to 2021.
Conclusions: Our findings demonstrate that increased ESG disclosure is associated with a higher bond debt ratio, indicating a shift towards public debt. Moreover, the positive relationship between ESG disclosure and bond debt is non-linear and applies primarily to firms with higher ESG disclosure scores. We further establish a causal link between ESG disclosure and firm bond ratios by demonstrating the distinctive impact of a regulatory change in the EU on this relationship.}},
  author       = {{Viétor, Caren and Larsson, David}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{ESG Disclosure and the Relevance for Public vs. Private Lenders}},
  year         = {{2023}},
}