Primary Corporate Bond Markets and Social Responsibility
55 Pages Posted: 10 Sep 2020 Last revised: 20 Dec 2021
Date Written: December 17, 2021
We document a robust, negative relation between corporate environmental and social (ES) performance and corporate bond issue spreads, even after controlling for ratings and other firm characteristics. Consistent with our theoretical model, this relation is due to bonds rated BBB or below, with spread-reductions of up to 98 basis points. These effects are predominantly related to product and employee scores. We do not find time trends for the ES-spread relation but document strong supply effects, as the share of issuers with good ES ratings has increased substantially. Finally, we provide evidence for a negative ES-credit-risk link.
Keywords: corporate bond market, credit risk, corporate social responsibility, ESG
JEL Classification: G11, G12, G32, G34
Suggested Citation: Suggested Citation