Keywords
credit rating
bonds
How to Cite
Abstract
The aim of this article is to assess whether having a creditworthiness assessment from more than one credit rating agency by issuers of ESG debt instruments affects the number of issues and the average amount issued. The empirical research was carried out using the observation method and the analysis of source documents. In the analysed period, 53.38% of issuers received ratings at least from one CRAs as S&P, Moody’s, and Fitch. The results of the conducted research indicate that the number of ESG debt instruments and the average issue amount were affected by the number of ratings given to the issuer. A database collected from Refinitiv Eikon for the period between 2012 and 2021 allows us to conclude that it is enough to have two credit ratings. The conclusions of this study can be used in the process of obtaining financing for ESG projects.
References
Ammer, J., & Packer, F. (2000). How Consistent are Credit Ratings? A Geographic and Sectoral Analysis of Default risk. International Finance Discussion Papers, 668.
Attig, N., El Ghoul, S., & Guedham, O. (2013). Corporate social responsibility and credit ratings. Journal of Business Ethics, 117, 679-694. https://doi.org/10.1007/s10551-013-1714-2
Avetisyan, E., & Ferrary, M. (2013). Dynamics of stakeholders’ implications in the institutionalization of CSR Field in France and in the United States. Journal of Business Ethics, 115(1), 115-133.
Avetisyan, E., & Hockerts, K. (2017). Consolidation of the ESG Rating Industry as Enactment of Institutional Retrogression. Business Strategy and the Environment, 26(3), 316-330. DOI: 10.1002/bse.1919
Avramov, D., Cheng, Si., Lioui, A., & Tarelli, A. (2021). Sustainable Investing with ESG Rating Uncertainty. Journal of Financial Economics, 145(2). http://dx.doi.org/10.2139/ssrn.3711218
Birindelli, G., Ferretti, P., Intonti, M., & Iannuzzi, A. P. (2015). On the drivers of corporate social responsibility in banks: Evidence from an ethical rating model. Journal of Management and Governance, 19, 303-340. https://doi.org/10.1007/s10997-013-9262-9
Bofinger, Y., Heyden, K. J., & Rock, B. (2022). Corporate social responsibility and market efficiency: Evidence from ESG and misvaluation measures. Journal of Banking & Finance, 134, 106322. https://doi.org/10.1016/j.jbankfin.2021.106322
Candelon, B., Gautier, A., & Petit, N. (2014). Market Power in the Credit Rating Industry: State of Play and Proposal for Reforms. CPI Antitrust Chronicle, 2. https://ssrn.com/abstract=2392989
Choy, E., Gray, S., & Ragunathan, V. (2006). Effect of credit rating changes on Australian stock returns. Accounting and Finance, 46(5), 755-769. DOI: 10.1111/j.1467-629X.2006.00192.x
Clementino, E., & Perkins, R. (2021). How Do Companies Respond to Environmental, Social and Governance (ESG) ratings? Evidence from Italy. Journal of Business Ethics, 171, 379-397. https://doi.org/10.1007/s10551-020-04441-4
Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The eco-efficiency premium puzzle. Financial Analysts Journal, 61(2), 51-63. https://doi.org/10.2469/faj.v61.n2.2716
Duque-Grisales, E., & Aguilera-Caracuel, J. (2021). Environmental, social and governance (ESG) scores and financial performance of multilatinas: moderating effects of geographic international diversification and financial slack. Journal of Business Ethics, 168, 315-334. https://doi.org/10.1007/s10551-019-04177-w
Eccles, R. G., & Serafeim, G. (2013). The performance frontier: Innovating for a sustainable strategy: Interaction. Harvard Business Review, 91(7), 17-18.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence from more than 2,000 empirical studies. Journal of Sustainability Finance Invesment, 5(4), 210-233. https://doi.org/10.1080/20430795.2015.1118917
Frydrych, S. (2020). The Role of Credit Rating of the Eurobond Issuers from Central and Eastern Europe. Annales Universitatis Mariae Curie-Skłodowska Sectio H – Oeconomia, 54(4), 31-40. https://doi.org/10.17951/h.2020.54.4.31-40
Frydrych, S. (2021). Credit ratings of issuers of green debt instruments. European Research Studies Journal, 24(4), 172-179.
Galbreath, J. (2013). ESG in focus: the Australian evidence. Journal of Business Ethics, 118(3), 529-541.
Gillan, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889. https://doi.org/10.1016/j.jcorpfin.2021.101889
Goldstein, I., Kopytov, A., Shen, L., & Xiang, H. (2022). On ESG Investing: Heterogeneous Preferences, Information, and Asset Prices. NBER Working Papers, 29839.
Gray, S., Mirkovic, A., & Ragunathan, V. (2006). The determinants of credit ratings: Australian evidence. Australian Journal of Management, 31(2), 333-354. DOI: 10.1177/031289620603100208
Humphrey, J., Lee, D. D., & Shen, Y. (2012). The independent effects of environmental, social and governance initiatives on the performance of UK firms. Australian Journal of Management, 37, 135-151. https://doi.org/10.2139/ssrn.1663444
Jang, G. Y., Hyoung-Goo, K., Ju-Yeong, L., & Kyounghun, B. (2020). ESG Scores and the Credit Market. Sustainability, 12(8), 3456. https://doi.org/10.3390/su12083456
Kang, Q., & Qiao, L. (2007). Credit Rating Changes and CEO Incentives. SSRN Electronic Journal. https://ssrn.com/abstract=971277
Lee, K.-H., Cin, B. C., & Lee, E. Y. (2016). Environmental responsibility and firm performance: The application of an environmental, social and governance model. Business Strategy and the Environment, 25(1), 40-53. https://doi.org/10.1002/bse.1855
Li, C., Wu, M., Chen, X., & Huang, W. (2022). Environmental, social and governance performance, corporate transparency, and credit rating: Some evidence from Chinese A-share listed companies. Pacific-Basin Finance Journal, 74, 101806. https://doi.org/10.1016/j.pacfin.2022.101806
Lo, S., & Sheu, H. (2007). Is corporate sustainability a value-increasing strategy for business? Corporate Governance: An International Review, 15(2), 345-358. https://doi.org/10.1111/j.1467-8683.2007.00565.x
Matthies, A. B. (2013). Empirical Research on Corporate Credit-Ratings: A Literature Review. SFB 649 Discussion Papers SFB649DP2013-003. Berlin: Humboldt University of Berlin. http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2013-003.pdf
McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21(5), 603-609. https://doi.org/10.1002/(SICI)1097-0266(200005)21:5<603::AID-SMJ101>3.0.CO;2-3
Nollet, J., Filis, G., & Mitrokostas, E. (2016). Corporate social responsibility and financial performance: A non-linear and disaggre- gated approach. Economic Modelling, 52(B), 400-407. https://doi.org/10.1016/j.econmod.2015.09.019
Pastor, L., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550-571. DOI: 10.1016/j.jfineco.2020.12.011
Pedersen, L. H., Fitzgibbons, S., & Pomorski, L. (2021). Responsible Investing: The ESG-Efficient Frontier. Journal of Financial Economics, 142(2), 572-597. DOI: 10.1016/j.jfineco.2020.11.001
Qureshi, M. A., Kirkerud, S., Theresa, K., & Ahsan, T. (2020). The impact of sustainability (environmental, social, and governance) disclosure and board diversity on firm value: The moderating role of industry sensitivity. Business Strategy and Environment, 29(3), 1199-1214. https://doi.org/10.1002/bse.2427
Semenova, N., & Hassel, L. G. (2008). Financial outcomes of environmental risk and opportunity for US companies. Sustainable Development, 16(3), 195-212. https://doi.org/10.1002/sd.365
Van Beurden, P., & Gössling, T. (2008). The worth of values—A literature review on the relation between corporate social and financial performance. Journal of Business Ethics, 82(2), 407-424. https://doi.org/10.1007/s10551-008-9894-x
Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303-319.
Wong, C. (2018). Rate the Raters 2018: Ratings Revisited. The Sustainability Institute. https://www.sustainability.com/globalassets/sustainability.com/thinking/pdfs/sa-ratetheraters_ratings-revisited_march18.pdf
Yamahaki, C., & Frynas, J. G. (2016). Institutional Determinants of Private Shareholder Engagement in Brazil and South Africa: The Role of Regulation. Corporate Governance: An International Review, 24(5), 509-527. https://doi.org/10.1111/corg.12166
Zeidan, R., Boechat, C., & Fleury, A. (2015). Developing a sustainability credit score system. Journal of Business Ethics, 127, 283-296.
Zerbib, O. D. (2019). The Effect of Pro-Environmental Preferences on Bond Prices: Evidence from Green Bonds. Journal of Banking & Finance, 98, 39-60. https://doi.org/10.1016/j.jbankfin.2018.10.012
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Copyright (c) 2023 Economics and Environment