ESG and Creditworthiness: Two Contrary Evidence from Major Asian Markets

Natthawat Jamprasert, Pornpitchaya Kuwalairat, Narapong Srivisal and Jananya Sthienchoak

No 129, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: Assets managed under sustainable investment criteria have been massively growing during the recent years. Among the criteria, environmental, social and governance (ESG) score leads the group as an important indicator of non-financial quality of a firm, which may reflect value to investors either through higher expected profit or lower risk. In this paper, we focus on the latter by exploring whether ESG score has any impact on the credit rating of firms due to the risk mitigation effect. Ordered logistic regressions were applied on a panel dataset of listed companies in Shanghai and Tokyo Stock Exchanges over 2009–2018. The results suggest that only in Japan, having ESG coverage is greatly associated with being awarded higher credit rating. However, just the environmental and governance pillars positively affect the Japanese firms' credit ratings, while the social pillar shows negative effect.

Keywords: ESG; Issuer Credit Rating; Ordered Logit; China; Japan (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 M14 Q51 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2020-03
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