Trust, social capital, and the bond market benefits of ESG performance

• DOI: 10.1007/s11142-021-09646-0
• Publication Date: 2022-04-14T04:02:40Z
• Authors: Hami Amiraslani; Karl V. Lins; Henri Servaes; Ane Tamayo
• Keywords: Corporate bond

Abstract We investigate whether a firm’s social capital and the trust that it engenders are viewed favorably by bondholders. Using firms’ environmental (E&S) performance to proxy for capital, we find no relation between bond spreads over period 2006–2019. However, during 2008–2009 financial crisis, which represents shock default risk, high-social-capital firms benefited from lower spreads. These effects stronger with higher expected agency costs of debt whose E&S efforts more salient. During were also able raise debt, at spreads, longer maturities. evidence governance element ESG is related The gap in bottom top terciles has narrowed since especially year prior accessing market.