Primary Corporate Bond Markets and Social Responsibility
36 Pages Posted: 10 Sep 2020 Last revised: 7 Jan 2021
Date Written: January 7, 2021
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: Suggested Citation