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ESG and Creditworthiness: Two Contrary Evidence from Major Asian Markets

Author

Listed:
  • Natthawat Jamprasert
  • Pornpitchaya Kuwalairat
  • Narapong Srivisal
  • Jananya Sthienchoak

Abstract

Assets managed under sustainable investment criteria have been massively growing during the recent years. Among the criteria, environmental, social and governance (ESG) score leads the group as an important indicator of non-financial quality of a firm, which may reflect value to investors either through higher expected profit or lower risk. In this paper, we focus on the latter by exploring whether ESG score has any impact on the credit rating of firms due to the risk mitigation effect. Ordered logistic regressions were applied on a panel dataset of listed companies in Shanghai and Tokyo Stock Exchanges over 2009–2018. The results suggest that only in Japan, having ESG coverage is greatly associated with being awarded higher credit rating. However, just the environmental and governance pillars positively affect the Japanese firms' credit ratings, while the social pillar shows negative effect.

Suggested Citation

  • Natthawat Jamprasert & Pornpitchaya Kuwalairat & Narapong Srivisal & Jananya Sthienchoak, 2020. "ESG and Creditworthiness: Two Contrary Evidence from Major Asian Markets," PIER Discussion Papers 129, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:129
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    More about this item

    Keywords

    ESG; Issuer Credit Rating; Ordered Logit; China; Japan;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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