Do corporate bond and credit default swap markets value environmental, social or corporate governance events?

Florian Berg and Yannick Le Pen ()
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Florian Berg: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Yannick Le Pen: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: We measure the impact of negative environmental, social and governance news on corporate bond prices and credit default swap premiums for the Eurozone market. Each firm is affected at least by one piece of news related to its environmental, social and governance practices. Each news is then flagged with an indicator of importance. Ab- normal bond returns are computed by subtracting return from a matching portfolio to the return of the observed bond return. Abnormal credit default swap return is calculated with a regression of the observed bond return on an equiweighted index that is constructed to transpose our bond universe on the credit default swap market. Several parametric and non parametric tests do not show any significant impact of these negative events as a whole on corporate bond prices, even though there is evidence of some impact of two subcategories of social events. When considering all events, we find a slight but counter-intuitive decrease of the credit default swap premium within the 5 following days of the event. REMARK: We did finish the database and have now more than 2000 events associated to 212 firms. Unfortunately, the calculation of the matching portfolios takes more time than we expected due to the various constraints. However, we joined the first results for the credit default swap market (Table 7). It does not change the results we found with our subsample of 85 firms.

Keywords: Corporate Social Responsibility; Bond market; Credit Default Swaps; Event study (search for similar items in EconPapers)
Date: 2013-05
Note: View the original document on HAL open archive server: https://hal.science/hal-01613922v1
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Published in 30th International French Finance Association Conference, May 2013, Lyon, France. pp.29

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