The impact of corporate social responsibility on corporate financial performance and credit ratings in Japan

Frank J. Fabozzi (), Peck Wah Ng and Diana E. Tunaru
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Frank J. Fabozzi: EDHEC Business School
Peck Wah Ng: EDHEC Business School
Diana E. Tunaru: University of Kent, Kent Business School

Journal of Asset Management, 2021, vol. 22, issue 2, No 2, 79-95

Abstract: Abstract We investigate the impact of companies’ sustainability efforts on their corporate financial performance (CFP) and credit ratings in Japan, based on a new proxy for corporate social responsibility (CSR)—Sustainalytics’ quantitative Environment, Social and Governance (ESG) ratings. We find weak evidence of a negative impact of ESG scores (on an aggregated basis and disaggregated basis) on several accounting measures of CFP. Our quantile regression results reveal a nonlinear pattern across the quantiles, with CSR effects intensifying at the extremal quantiles. However, we find a weak positive relationship between ESG and stock market-based measures, as well as between ESG and credit ratings. Our findings suggest that investors, credit rating agencies (CRAs) and regulators should differentiate between the three types of ESG screening as they interact and contribute in their specific way to the aggregate ESG effect.

Keywords: Corporate social responsibility; Corporate financial performance; Credit ratings; Environment; social and governance ratings; Quantile regression (search for similar items in EconPapers)
JEL-codes: C21 C23 G39 Q50 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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DOI: 10.1057/s41260-021-00204-6

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