Sustainability in cross-atlantic economies: The effect of ESG score on cost of debt in the EU and US
(2025) BUSN79 20251Department of Business Administration
- Abstract
- Title: Sustainability in cross-atlantic economies: The effect of ESG score on cost of debt in the EU and US
Seminar date: 2025-06-02
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Johan Hellberg & Vilhelm Andersson
Supervisor/examiner: Elias Bengtsson/Diem Nguyen
Key words: ESG, cost of debt, financial systems, sustainability regulations, stakeholder
Purpose: This study aims to examine the relationship between ESG and the cost of debt, with a comparative focus on firms operating within the EU and the US. Thereby we further investigate how different financial systems and regulatory environments influence this relationship.
Method: The study applies a deductive approach grounded in prior theoretical... (More) - Title: Sustainability in cross-atlantic economies: The effect of ESG score on cost of debt in the EU and US
Seminar date: 2025-06-02
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Johan Hellberg & Vilhelm Andersson
Supervisor/examiner: Elias Bengtsson/Diem Nguyen
Key words: ESG, cost of debt, financial systems, sustainability regulations, stakeholder
Purpose: This study aims to examine the relationship between ESG and the cost of debt, with a comparative focus on firms operating within the EU and the US. Thereby we further investigate how different financial systems and regulatory environments influence this relationship.
Method: The study applies a deductive approach grounded in prior theoretical frameworks and literature. Our study's main empirical methodology employs fixed effects and pooled OLS regressions. As the dependent variable, the cost of debt is used, while ESG scores are used as the main explanatory one. An interaction term is applied to test for regional differences.
Theoretical perspective: The theoretical perspectives used in the study are the traditional Agency Theory and Stakeholder Theory. Through these, the concept of information asymmetry, signaling and risk management are also discussed.
Empirical foundation: The study uses a sample of 640 publicly listed firms (250 EU and 390 US) over the period 2015-2024. Financials were excluded.
Conclusion: We find robust evidence of a negative and statistically significant relationship between ESG scores and the cost of debt. Specifically, a one unit increase in ESG scores corresponds to a reduction in the cost of debt by 0,566-0,660 bps. However, the study found limited support of statistical significance for the moderating effect of the region (EU and US). (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9193782
- author
- Andersson, Vilhelm LU and Hellberg, Johan LU
- supervisor
- organization
- course
- BUSN79 20251
- year
- 2025
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- ESG, cost of debt, financial systems, sustainability regulations, stakeholder
- language
- English
- id
- 9193782
- date added to LUP
- 2025-06-26 13:58:33
- date last changed
- 2025-06-26 13:58:33
@misc{9193782,
abstract = {{Title: Sustainability in cross-atlantic economies: The effect of ESG score on cost of debt in the EU and US
Seminar date: 2025-06-02
Course: BUSN79 - Degree Project in Accounting and Finance
Authors: Johan Hellberg & Vilhelm Andersson
Supervisor/examiner: Elias Bengtsson/Diem Nguyen
Key words: ESG, cost of debt, financial systems, sustainability regulations, stakeholder
Purpose: This study aims to examine the relationship between ESG and the cost of debt, with a comparative focus on firms operating within the EU and the US. Thereby we further investigate how different financial systems and regulatory environments influence this relationship.
Method: The study applies a deductive approach grounded in prior theoretical frameworks and literature. Our study's main empirical methodology employs fixed effects and pooled OLS regressions. As the dependent variable, the cost of debt is used, while ESG scores are used as the main explanatory one. An interaction term is applied to test for regional differences.
Theoretical perspective: The theoretical perspectives used in the study are the traditional Agency Theory and Stakeholder Theory. Through these, the concept of information asymmetry, signaling and risk management are also discussed.
Empirical foundation: The study uses a sample of 640 publicly listed firms (250 EU and 390 US) over the period 2015-2024. Financials were excluded.
Conclusion: We find robust evidence of a negative and statistically significant relationship between ESG scores and the cost of debt. Specifically, a one unit increase in ESG scores corresponds to a reduction in the cost of debt by 0,566-0,660 bps. However, the study found limited support of statistical significance for the moderating effect of the region (EU and US).}},
author = {{Andersson, Vilhelm and Hellberg, Johan}},
language = {{eng}},
note = {{Student Paper}},
title = {{Sustainability in cross-atlantic economies: The effect of ESG score on cost of debt in the EU and US}},
year = {{2025}},
}