Credit default swaps and corporate ESG performance

Ran Zhao and Lu Zhu

Journal of Banking & Finance, 2024, vol. 159, issue C

Abstract: This study finds that credit default swap (CDS) trading positively affects a firm's environmental, social, and governance (ESG) performance. This effect is more prominent in ESG strengths than ESG concerns. The proposed empirical connection remains valid across endogeneity-controlling methodologies, model specifications, and ESG performance measures. The effect is stronger for firms with stronger bank relationships, higher debt dependence, and more restrictive covenants. Furthermore, improvement in ESG performance is more pronounced for firms with more free cash flow, lower institutional ownership, and higher financial constraints. Our findings reveal the real effects of CDS trading on firm ESG performance.

Keywords: Credit default swaps; ESG performance; Debt dependence; Lender Monitoring (search for similar items in EconPapers)
JEL-codes: G10 G30 G31 G32 M14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426623002741
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:159:y:2024:i:c:s0378426623002741

DOI: 10.1016/j.jbankfin.2023.107079

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().