Credit development and ESG performance: Cross-country evidence

Linda Tinofirei Muchenje, Tom Coupe and Huong Dieu Dang

Research in International Business and Finance, 2025, vol. 78, issue C

Abstract: This study quantifies the effect of a country’s credit development on the environmental, social, and governance (ESG) performance of non-financial firms. Examining 4664 listed firms across 40 countries over the period 2003–2021, we find that firms located in economies with a higher level of credit development exhibit better ESG performance. The association is stronger for financially constrained firms, bank finance-dependent firms, firms in emerging markets, and firms with severe information asymmetry. Furthermore, the relationship with corporate environmental performance, specifically emissions reduction, becomes more pronounced after the signing of the Paris Agreement and is stronger for firms in economies with climate laws/policies in place.

Keywords: Credit development; Corporate Social Responsibility (CSR); Environmental, Social and Governance (ESG); Sustainability performance (search for similar items in EconPapers)
JEL-codes: G20 G21 M14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:78:y:2025:i:c:s0275531925002636

DOI: 10.1016/j.ribaf.2025.103007

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