Abstract
This paper empirically examines the impact of environmental, social and governance (ESG) performance and its individual components on the cost of debt and the cost of equity. Using a sample of S&P 500 firms from 2015 to 2021, we find that strong ESG performance reduces the cost of debt and the cost of equity. Furthermore, our analyses on the individual constituents of the ESG performance indicate that firms with high environmental and social performance benefit from both lower cost of debt and cost of equity with the effect more pronounced for cost of equity. The evidence also indicates that high performance in governance only has implications for equity cost of capital. The evidence supports the position that integrating relevant ESG activities in firm business model has capital raising benefits.
Original language | English |
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Pages (from-to) | 74-96 |
Number of pages | 23 |
Journal | International Journal of Monetary Economics and Finance |
Volume | 17 |
Issue number | 1 |
Early online date | 25 Mar 2024 |
DOIs | |
Publication status | Published - 2024 |
Keywords
- capital structure
- cost of debt
- cost of equity
- environmental
- social and governance
ASJC Scopus subject areas
- Finance
- Economics and Econometrics