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Assessing the Impact of ESG Performance on Financing Costs: An Analysis of Nordic Firms

Honkala, Julius LU and Sawelin, Carl LU (2024) BUSN79 20241
Department 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:
author
Honkala, Julius LU and Sawelin, Carl LU
supervisor
organization
course
BUSN79 20241
year
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}},
}