Primary Corporate Bond Markets and Social Responsibility

36 Pages Posted: 10 Sep 2020 Last revised: 7 Jan 2021

See all articles by Michael Halling

Michael Halling

University of Luxembourg

Jin Yu

Monash University -Department of Banking and Finance

Josef Zechner

Vienna University of Economics and Business

Date Written: January 7, 2021

Abstract

We document that good ES-performance is rewarded in primary bond markets by lower spreads. This effect is strongest for low-rated bonds and for firms in manufacturing, agriculture, mining and construction. However, not all ES-dimensions are equally important. The above results are driven mostly by the product-related dimension and to a lesser extent by the employee-related dimension. Environment-related aspects only seem to matter for those industries with largest exposure to environmental risks. Finally, we neither find that the above results are driven by crisis periods nor pronounced dynamics reflecting the growing interest in ESG. Instead, we document a link between ES-scores and credit risk. Thus, our evidence suggests that some ES-dimensions capture information that is relevant for default risk.

Keywords: corporate bond market, credit risk, corporate social responsibility, ESG

JEL Classification: G11, G12, G32, G34

Suggested Citation

Halling, Michael and Yu, Jin and Zechner, Josef, Primary Corporate Bond Markets and Social Responsibility (January 7, 2021). Swedish House of Finance Research Paper No. 20-13, Available at SSRN: https://ssrn.com/abstract=3681666 or http://dx.doi.org/10.2139/ssrn.3681666

Michael Halling

University of Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Jin Yu (Contact Author)

Monash University -Department of Banking and Finance ( email )

Melbourne
Australia
+61 3 99034590 (Phone)

HOME PAGE: http://sites.google.com/site/jinyufinecon/

Josef Zechner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien A-1019
Austria

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