Is ESG a Sideshow? ESG Perceptions, Investment, and Firms’ Financing Decisions

Kräussl, Roman, Joshua Rauh and Denitsa Stefanova
Authors registered in the RePEc Author Service: Roman Kräussl

No 19282, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the effects of market ESG perceptions, as proxied by ESG ratings, on public firms’ security issuance and asset accumulation decisions. As many ratings products use restated or backfilled ratings, we focus on point-in-time (PIT) ratings. Higher ESG scores are associated with increases in equity issuance, and decreases in net debt issuance of similar magnitude, driven completely by the “E†component of ESG. There are no effects of ESG assessments on capital expenditures or non-cash asset accumulation, supporting the hypothesis that ESG perceptions are a sideshow for investment. We document that if using a standard ratings product instead of PIT data, researchers might falsely infer that higher ESG ratings lead to investment and positive asset accumulation, due in particular to the use of ESG scores in standard ratings data products.

Keywords: Capital structure; Equity issues; Debt issues; ESG ratings (search for similar items in EconPapers)
JEL-codes: G15 G31 G32 G34 (search for similar items in EconPapers)
Date: 2024-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19282 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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:cpr:ceprdp:19282

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19282

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().