Discussion of “Does the Cost of Borrowing Increase for Firms That are Socially and Environmentally Irresponsible?â€

Yachang Zeng ()
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Yachang Zeng: Nanyang Business School, Nanyang Technological University, 91 Nanyang Avenue, Gaia, Singapore 639956, Singapore

The International Journal of Accounting (TIJA), 2025, vol. 60, issue 03, 1-11

Abstract: This discussion evaluates the study by Ahmed, Eliwa, Tahat, Burton, and Paramati (2025) (henceforth, Ahmed et al. (2025)), which examined whether irresponsible environmental, social, and governance (IESG) practices increase firms’ cost of debt (CoD). Ahmed et al. (2025) demonstrated that IESG practices significantly raise the borrowing costs, particularly in countries with lower levels of corruption. Notably, the study found that firms in “sin industries†faced penalties comparable to those imposed on firms in other industries. Ahmed et al. (2025) further examined the directional dynamics of ESG and IESG practices, showing that simultaneous increases in both scores elevate the CoD, whereas reductions in IESG, coupled with ESG improvements, lead to significant decreases in the CoD. Moreover, the study documented a key asymmetry: Lenders penalize IESG practices more severely than they reward positive ESG behavior. While the study offered valuable insights, this discussion highlights areas requiring further attention, including the clarity of key findings and ESG metrics, alternative economic explanations, ESG data quality, and potential endogeneity issues. The discussion concludes by proposing recommendations to address these limitations and enhance future research.

Keywords: Discussion; irresponsible ESG (IESG); cost of debt; international context (search for similar items in EconPapers)
JEL-codes: D22 D25 F23 G32 L21 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S1094406025800010

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