The Influence of ESG Controversies on Financing Costs for European Companies: Does Culture Matter?

Souad Brinette, Marie-Josèphe Rigobert and Slimane Ed-Dafali
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Souad Brinette: EDC - EDC Paris Business School
Marie-Josèphe Rigobert: ESPI2R - Laboratoire ESPI2R Research in Real Estate [Paris] - ESPI - Ecole Supérieure des Professions Immobilières, ESPI - Ecole Supérieure des Professions Immobilières
Slimane Ed-Dafali: el jadida - National School of Commerce and Management, Chouaib Doukkali University

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Abstract: This study examines the relationship between environmental, social, and governance (ESG) controversies and corporate financing costs, focusing on the moderating effect of national culture. It analyzes European companies listed on the STOXX 600 Index from 2016 to 2023. The findings indicate that lenders perceive ESG scandals unfavorably, with certain cultural dimensions moderating this effect. In countries characterized by individualism and masculine cultural traits, companies involved in ESG controversies, regarded as unethical, face higher equity costs. Conversely, countries with high uncertainty avoidance and power distance experience increased long- term debt costs. We find that national culture does not significantly affect short- term debt financing. These findings provide valuable insights for financial regulators seeking to mitigate the impact of ESG controversies and enhance corporate financing. The results are robust to alternative measures of ESG controversies, cultural dimensions, and endogeneity concerns.

Keywords: corporate ethical behavior; cost of financing; cultural dimensions; debt; equity; ESG controversies (search for similar items in EconPapers)
Date: 2026-01-13
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Published in Business Strategy and the Environment, 2026, ⟨10.1002/bse.70604⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05706624

DOI: 10.1002/bse.70604

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